Appendix — Perlman v. Attorney General of New Jersey

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

>

CLIFFORD PERLMAN AND STUART PERLMAN,

Appellants,

—Vie

ATTORNEY GENERAL OF NEW JERSEY AND

NeW JERSEY CASINO CONTROL COMMISSION,

Appellees.

ON APPEAL FROM THE SUPREME COURT OF NEW JERSEY

APPENDIX TO JURISDICTIONAL STATEMENT

PETER M. FISHBEIN*

MICHAEL D. BLECHMAN

Kaye, Scholer, Fierman,

Hays & Handler

425 Park Avenue

New York, New York 10022

(212) 407-8000

Attorneys for Appellants

Clifford and Stuart Perlman

*Counsel of Record

APPENDIX

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PAGE

APPENDIX A

Opinion of the Supreme Court of New Jersey

SUPREME COURT OF NEW JERSEY

99 N.J. 361

Argued March 22, 1982 Decided July 21, 1982

—

IN THE MATTER OF

THE APPLICATION OF BOARDWALK

REGENCY CORPORATION FOR A CASINO LICENSE

=

William R. Glendon, a member oi the New York bar, argued

the cause for applicant-appellant and ci « -‘espondent Board-

walk Regency Corporation and appellants and cross-respond-

ents Caesars World, Inc. and Caesars New Jersey, Inc.

(Wilentz, Goldman & Spitzer, attorneys; William P. Glendon,

Guy C. Quinlan and Robert A. Rabbino, Jr., members of the

New York bar, and Morris Brown and Brian J. Molloy, of

counsel).

Irving Younger, a member of the New York and District of

Columbia bars, argued the cause for appellants and cross-re-

spondents Clifford S. Perlman and Stuart Z. Perlman (Pitney,

Hardin, Kipp & Szuch, attorneys; Irving Younger, Edward

Bennett Williams, Harold Unger and Robert B. Barnett, mem-

bers of the District of Columbia bar, of counsel; Clyde A.

Szuch, Murray J. Laulicht, Marc §. Klein and Stuart M.

Feinbiatt, on the briefs).

Michael R. Cole, Assistant Attorney General, argued the

cause for respondent and cross-appellant Attorney General of

New Jersey (/rwin I. Kimmelman, Attorney General of New

Jersey, attorney; Andrea M. Silkowitz, Deputy Attorney

General, on the briefs).

2a

Robert J. Genatt, General Counsel, argued the cause for

respondent and cross-appellant New Jersey Casino Control

Commission (Mr. Genatt, attorney; Robert J. Genatt, Thomas

N. Auriemma, Dennis Daly and Edward R. Hannaman, on the

briefs).

7

The opinion of the Court was delivered by

CLIFFORD, J.

Boardwalk Regency Corporation (BRC) applied for a

plenary license pursuant to the Casino Control Act, N.J.S.A.

5:12-1 to -152 (Act). After conducting investigations and

hearings on the application, tne Casino Control Commission

(Commission) found that two of the directors of BRC, Clif-

ford S. and Stuart Z. Perlman, had failed to satisfy the

standards set forth in the Act regarding ‘‘casino key employ-

ees.”’ See N.J.S.A. 5:12-84(c), -85(c) and -89(b)(2). The Com-

mission ruled that if the Perlmans were not removed from

positions of control in the extensive corporate hierarchy of

which BRC and its corporate parents, Caesars New Jersey,

Inc. (CNR) and Caesars World, Inc. (CWI), were a part,

BRC’s application would be denied. The Commission further

required BRC to choose, by November 26, 1980, either (1) to

sever the Perlmans permanently from any ownership or em-

ployment connection with BRC, any of its parent companies,

and any subsidiary of CWI in this or any other jurisdiction, or

(2) withdraw as a casino licensee from New Jersey. BRC was

also directed to submit a plan for Commission approval to

implement whichever alternative it chose. Following the Appel-

late Division’s denial of a stay of these conditions this Court

granted a stay pending appeal.

On consolidated appeals of the Perlmans and the corpora-

tions the Appellate Division affirmed the Commission’s deci-

sion as to the non-qualification of the Perlmans, but reversed

to the extent that it required the Perlmans to divest their

personal interests from non-New Jersey subsidiaries of CWI

having no ‘“‘gaming’’ activities. Jn re Boardwalk Regency

Casino License Application, 180 N.J.Super. 324 (1981). It

remanded to the Commission to recast its order consistent with

3a

the Appellate Division opinion and for ‘‘reasonable revision of

the timetable.’’ Jd. at 350. The stay imposed by this Court

remains in effect. /bid.

The Perlmans and the corporations then filed notices of

appeal to this Court, asserting ‘‘a substantial question arising

under the Constitution of the United States’’, R.2:2-1(a); and

we granted the petitions for certification of the Attorney

General and the Commission regarding the Appellate Divi-

sion’s modification of the Commission’s order, 89 N.J. 405

(1982). In addition, the Attorney General filed a notice of

cross-appeal directed to the same issue raised in his petition,

namely, the Appellate Division’s invalidation of the Commis-

sion’s requirement that the Perlmans disconnect themselves

from all non-New Jersey non-gaming activities.

Specifically, the Commission required that as one of the

conditions of BRC’s casino licensure, the Perlmans must

dispose of any interest whatsoever in subsidiaries of CWI that

are situated outside of New Jersey and are not engaged in

casino gaming activities; must be removed from any position

as an officer, director or employee of such subsidiaries; and

must not receive any remuneration in any form from such

subsidiaries. It is this condition that the court below struck

down. Today we reinstate that condition of licensure. With the

exception of that single modification, we affirm the judgment

of the Appellate Division substantially on the basis of Judge

Fritz’s comprehensive and perceptive opinion for that court.

While the Appellate Division’s discussion of the facts, 180

N.J. Super. at 331-32, 335-36, suffices for our purposes today,

several features nonetheless bear repeating. Initially, it is note-

worthy that CWI, aptly described below as ‘‘[a] creature of

humble beginnings,” id. at 331, is today a multifaceted cor-

porate giant, which, through its various nationwide subsidi-

aries, owns and operates businesses in both the gaming and

non-gaming industries. Of particular import to this case, how-

ever, is CWI’s relationship to BRC: BRC is a wholly owned

subsidiary of CNJ in which CWI owns an 85% stock interest.

4a

Moreover, since the Appellate Division decision, there have

been several developments regarding the Perlmans’ relation-

ship with CW! and its subsidiaries. By way of background,

when the matter first came before the Commission in Septem-

ber 1978, both Perlmans owned an extensive interest in CWI,

CNJ, and thereby BRC. Clifford Perlman was Chairman of

the Board of Directors and chief executive officer of CWI and

CNJ, in addition to holding a 10% stock interest in CWI, and

a 1.4% interest in CNJ. Stuart Perlman was Vice-Chairman of

the Board of Directors of CWI and CNJ. His stock ownership

in CWI, about 8%, was second only to that of Clifford

Perlman. He also held approximately a 1% interest in CNJ.

In contrast to the facts as they appeared when the case was

before the Commission and the Appellate Division, the

Perimans’ relationship to BRC through their extensive interest

in CWI and CNJ has since changed. On October 30, 1981,

CWI and the Perlmans entered into an agreement that pro-

vided that (1) the Perlmans would sell, and CWI would

purchase, the Perlmans’ shares of CWI and CNJ stock; (2) the

Perlmans would acquire promissory notes for part of the

purchase price of their CWI and CNJ stock; and (3) the

Perlmans would resign from all of their positions as officers

and directors of CWI and its subsidiaries, save for the fact that

Clifford Perlman would enter into an agreement to continue as

Chairman of the Board and chief executive of Desert Palace,

Inc., a CWI subsidiary responsible for operating CWI’s

Nevada based casino-hotels.' On December 15, 1981, the Com-

mission, upon application by CWI, approved of the arrange-

ment except for Clifford Perlman’s continued relationship with

Desert Palace, Inc. A shareholder’s suit challenging the ar-

rangement was settled before we heard argument on the case.

As a threshold matter we must decide whether the agree-

ments entered into between CWI and the Perlmans render this

controversy moot, and whether the parties thereto have stand-

ing to raise the issues projected by this appeal. In our approach

1 The agreement further provided that should the decisions below

remain intact after this appeal, CWI has the option under the agreement to

terminate Clifford Perlman from his positions with Desert Palace, Inc.

Sa

to these threshold questions, we are not limited to the ‘‘case or

controversy’’ requirement imposed on the federal courts by

way of Article Ill of the Federal Constitution, U.S.Const. art.

Ill § 2. See Crescent Park Tenants Ass’n v. Realty Equity

Corp. of N.J., 58 N.J. 98, 107 (1971). Rather, in this jurisdic-

tion a controversy is justiciable when ‘‘the litigants’ concern

with the subject matter evidence[s] a sufficient stake and real

adverseness.’’ Jd. Moreover, where the parties lack a legally

cognizable interest because the issues presented are technically

moot, they may nonetheless obtain judicial review when the

matter involves an area of particular concern to the public

interest. See, e.g., John F. Kennedy Memorial Hospital v.

Heston, 58 N.J. 576, 579 (1971); Doe v. Bridgeton Hospital

Ass’n, Inc., 71 N.J. 478, 482 n.1 (1976).

It is apparent that both Clifford and Stuart Pcsiman have

standing and that the issues are not moot. As to Clifford

Perlman, his interest in the outcome of this appeal assuredly

remains live by the very terms of the agreement itself, which

provides that if he is directed by this Court to divest his interest

in CWI’s gaming subsidiaries, his position at Desert Palace will

be in jeopardy. See supra (At 367 n.1).

As to Stuart Perlman as well there remains a legally cogniza-

ble interest in the outcome of this appeal. Notwit standing his

agreement with CWI, there exists at least the possibility of his

future involvement with CWI or one of its subsidiaries, given

the extensive influence available to him within the CWI cor-

porate structure. Moreover, we will not fetter a litigant with

technical notions of justiciability when the only question as to

whether his claim is amenable to judicial review arises from his

compliance with a lower court or agency decision.

Finally, as to both Clifford and Stuart Perlman, it is beyond

question that the final adjudication of the issues is a matter of

considerable importance to the casino industry as well as the

general public. Accordingly, the Perlmans’ claims are ripe for

judicial review.

6a

We turn to the merits of the case. Judge Fritz’s exhaustive

opinion below rejected a vigorous attack mounted by the

Perlmans and the corporations regarding the Commission’s

determination that neither Clifford nor Stuart Perlman had

met the statutory requirement of demonstrating by clear and

convincing evidence their good character, honesty and integ-

rity. That attack has been renewed before this Court. The

Appellate Division initially rejected the argument that the

Commission failed to discuss adequately the relevant evidence

in reaching its ultimate conclusions and that its conclusions

were not based on sufficient credible evidence in the record.

180 N.J.Super. at 335-39. The Appellate Division also found

**ingenious’’ but ‘‘unpersuasive’’ the contentions of the

Perlmans and the corporations that the Act requires only a

demonstration of the putative casino key emplcyee’s reputa-

tion for good character. /d. at 343. In this regard the court

below found that the Act requires a demonstration of good

character in fact, given the Legislature’s explicit statements of

public policy and of the ‘‘evils’’ it sought to address through

the imposition of exacting and rigorous licensing procedures.

Id. at 343-44.

The Appellate Division also considered a barrage of consti-

tutional challenges to the statutory ‘‘good character’ criterion.

It rejected the contention that this criterion violated the

Perlmans’ due process rights, because it was unduly vague,

stating thai ‘‘the potential key employee is reasonably apprised

by the statute, as a matter of common knowledge, in light of

ordinary human experience, as to the kind of conduct neces-

sary to satisfy the statute.’’ Jd. at 347. Similarly lacking in

merit, in the court’s view, was the contention that the good

character criterion ‘‘allow[{ed] the Commission to rely on guilt

by association.’’ Jd. at 348.

We have reviewed the legal principles that underlie each of

these arguments and the record developed below upon which

the Commission based its findings. As to the arguments raised

by the Perlmans and the corporations, set forth above, we

repeat our endorsement of Judge Fritz’s painstaking analysis

7a

and of the conclusions achieved in his opinion for the Appel-

late Division.

IV

There remains one further area of discussion. As a final

point of contention the Perlmans and the corporations main-

tain that the Commission’s Order unconstitutionally condi-

tions BRC’s licensure on the Perlmans’ divestiture of their

interests in non-New Jersey subsidiaries of CWI. Their chal-

ienge in this regard is mounted on the basis of the Commerce

Clause, U.S.Const. art. 1, § 8, and the Due Process Clause,

U.S.Const. amend. XIV.

As matters stand today, with this Court’s stay in effect (see

supra at 365), BRC is operating a New Jersey casino and

Clifford Perlman is acting as chairman of the board of CW''’s

subsidiary Desert Palace, Inc., operator of CWI’s Nevada

gambling casino, Caesars Palace. Caesars Palace’s position in

the scheme of things is only partially illustrated by the fact that

it is CWI’s principal and most profitable asset, having gener-

ated for the year ending April 30, 1980 about 43% of CWI’s

total gross revenues. In addition, it is the model after which

CWI’s hotel casino facilities, including BRC, are patterned,

and it provides BRC with consultant services and management

counselling. BRC and Caesars Palace share some directors in

common. In his current position as Desert Palace’s chairman

Clifford Perlman has a direct relationship with Caesars Pa-

lace’s management, and BRC has a direct relationship with the

Nevada casino. The circumstances of Clifford Perlman’s abil-

ity to influence BRC policy, too apparent to require further

belabored explication, prompt our agreement with the Appel-

late Division’s disposition of the Commerce Clause argument:

The fallacy in this argument is that the order is said to

purport ‘‘to regulate the management of substantial non-

New Jersey operations * * * and to limit the Perlmans’

business activities outside of New Jersey,’’ when in fact it

does no such thing. It neither regulates CWI nor any of its

subsidiaries except BRC or the Perlmans, nor tells them

what they must do. It only tells BRC, in terms completely

8a

in line with the statute and its purposes, the condition

which must exist in view of its corporate connections,

before it can enjoy the privilege of a casino license. No

one will argue that New Jersey does not have a legitimate

local public interest in determining who shall be thus

licensed in New Jersey and under what conditions. We are

satisfied this issue has no merit and warrants no further

discussion. [180 N.J.Super. at 349.]

See Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct.

844, 847, 25 L.Ed.2d 174, 178 (1970); Exxon Corp. v. Gov-

ernor of Maryland, 437 U.S. 117, 124-127, 98 S.Ct. 2207,

2213-2215, 57 L.Ed.2d 91, 99-101 (1972).

With the same dispatch, and on the same basis, can we

address the Due Process argument, it being manifest that the

Commission’s divestiture order bears a rational relationship to

a legitimate state interest. Insofar as the Due Process Clause is

concerned, since no fundamental right is affected by the

Commission’s order, that ends the matter. See Ballou v. State

Department of Civil Service, 75 N.J. 365, 370-71 (1978); State

v. Krol, 68 N.J. 236, 248 (1975).

The Commission’s order also required the disassociation of

the Perlmans’ personal interest in the non-New Jersey subsidi-

aries of CWI that had and have no connection with the gaming

industry. As to this aspect of the Order, the Appellate Division

was not convinced that traditional notions of due process had

been satisfied. Essentially, the court seemed uncertain that

requiring divestiture to this extent would serve any ‘‘legitimate

state intevest.’’ 180 N.J.Super. at 349. We harbor no doubts on

the issue, and we fail to see why, in the context of this case,

any distinction should be made between gaming and non-gam-

ing subsidiaries. The question remains, in either instance,

whether the presence of either Perlman in the CWI corporate

structure carries with it the opportunity for them to exert their

personal influence in the operation of BRC. In the non-gaming

as well as the gaming setting that question must be answered in

the affirmative.

The record demonstrates that for many years the Perlmans

have wielded enormous power and influence throughout CWI,

9a

which, it should be recalled, is simply a holding company with

operating subsidiaries. Permitting the Perlmans to remain in or

assume a structured, formal relationship of ownership, em-

ployment or management in one of those subsidiaries, albeit a

non-gaming enterprise, would encourage—or at the very least

allow—the exertion of power and influence within the cor-

porate structure. Indeed, the court below appears to have

recognized this possibility by its reservation unto the Commis-

sion of the right to act should a ‘“‘Perlman effect’’ become

**manifest’’, citing N.J.S.A. 5:12-129. 180 N.J.Super. at 349.

What the Commission sought to do was prevent the

Perlmans from influencing gaming policy, rather than react to

that influence after it has been exerted. This is a reasonable

aim, particularly inasmuch as the evidence demonstrated a

substantial likelihood that the Perlmans would leave their

mark on BRC policy were they to obtain or continue to occupy

official positions within the corporate family. This perception

of the Perlmans’ presence within the corporate structure is

borne out by the corporation’s assertion that ‘‘the loss of the

Perlmans’ services has been, and continues to be, a substantial

detriment’”’ to CWI. Moreover, the corporations call attention

to the ‘‘substantial and uncontradicted’’ evidence as to the

importance of the Perlmans’ functions in CWI and as to ‘“‘the

harm which has resulted to the company since the Perlmans

have been isolated from its affairs.’’ Given the degree of

importance that the corporations themselves attach to Clifford

and Stuart Perlman, we cannot say that the Commission’s

apprehension of their influence on CWI and BRC, even from a

non-gaming subsidiary position, is ill-founded; nor can we

conclude that there is insufficient evidence to support the

conclusion that divestiture of the Perlmans’ interests in CWI’s

non-gaming subsidiaries bears a rational relationship to the

state’s legitimate interest in preventing them from exercising

corporate power and influence over BRC.

10a

Vv

Except as modified herein the judgment below is affirmed.

All provisions of the Commission’s order are reinstated, and

the Commission is directed to establish a new timetable for

submission of BRC’s plans. The stay heretofore entered is

vacated, effective ten days after release of this opinion.

>

PASHMAN, J., concurring in part and dissenting in part.

I concur with the majority opinion except insofar as it

affirms the Casino Control Commission’s order that the

Perlmans separate themselves from non-New Jersey subsidi-

aries of Caesars World International (CWI). | would remand

the case to the Commission for a factual finding on the

Perlmans’ ability to control Boardwalk Regency Corporation

from positions in any other CWI subsidiaries.

The Casino Control Act provides that no corporation shall

be eligible for a casino license unless its key employees or

controlling persons are individually qualified for licenses.

N.J.S.A. 5:12-85(c) provides in part:

No corporation shall be eligible to hold a casino license

unless each officer; each director; each person who

directly or indirectly holds any beneficial interest or

ownership of the securities issued by the corporation; any

person who in the opinion of the commission has the

ability to control the corporation . . . or other person

whom the commission may consider appropriate for ap-

proval or qualification would, but for residence, individu-

ally be qualified for approval as a casino key employee

pursuant to the provisions of the act.

When Boardwalk Regency applied for a license, Clifford

Perlman was chairman of the boards of directors of CWI and

Caesars New Jersey (CNJ), the two parent corporations of

Boardwalk Regency. Stuart Perlman was vice chairman of the

boards of the two parent companies and a large stockholder in

both. There was no question that they were key employees and

controlling persons as defined in the statute.

However, it is no longer clear that the Perlmans fit within

any of the categories of persons that must be individually

qualified for Boardwalk Regency to retain its license under

N.J.S.A. 5:12-86(c). They have sold all their stock in Caesars

World and Caesars New Jersey and have resigned from their

positions as officers in those corporations. Their sole remain-

ing connection with the corporate family is Clifford Perlman’s

position as chairman of the board of directors and chief

executive officer of the subsidiary of Caesars World that

operates its Nevada hotel and casino.

Since the Perlmans are no longer directors, officers, employ-

ees or owners of any of the parent companies of Boardwalk

Regency, the only remaining statutory category possibly appli-

cable to them is that of a ‘“‘person who in the opinion of the

commission has the ability to control’’ Boardwalk Regency.

N.J.S.A. 5:12-85(c). The Commission has never specifically

determined whether the Perlmans would be able to control

Boardwalk Regency solely from positions in other subsidiaries

of Caesar’s World. There is no evidence in the record on the

Perlmans’ ability to control the New Jersey licensee without

control of and stock ownership in its parent corporations.

Unless they are able to exercise such control, they need not be

individually qualified for Boardwalk Regency to retain its

license.

I am not convinced that the evidence cited by the majority,

ante at 370-371, 372, is sufficient to conclude that the

Perlmans can in fact control Boardwalk Regency from out-of-

state CWI subsidiaries. The mere fact that the various corpora-

tions praise the Perlmans and want them back in the New

Jersey licensee is not sufficient proof that the Perlmans can

control the licensee solely from positions in other CWI subsidi-

aries. The evidence that the Nevada subsidiary offers counsel-

ing services to Boardwalk Regency is more to the point, but it

is insufficiently developed in the record. Moreover, there is no

evidence at all that the Perlmans can control Boardwalk

Regency from non-gaming subsidiaries. As I see it, the factual

situation has changed substantially since the Commission’s

determination. Any order we make should be based on the

current situation.

12a

I would remand the case to the Commission for a hearing on

the Perlmans’ continued ability to control the New Jersey

licensee from positions in other CWI subsidiaries. This factual

determination is a prerequisite to holding that either Perlman

remains 2 controlling person within the meaning of N.J.S.A.

5:12-85(c). Without such a finding, there is no basis for

requiring Clifford Perlman to withdraw from the Nevada

subsidiary as a prerequisite to licensing Boardwalk Regency.

There is also no factual basis for ordering the Perlmans to

refrain from any future connections with other CWI subsidi-

aries. Because the majority upholds the Commission order that

the Perlmans separate themselves from all CWI subsidiaries

without such a factual determination, I dissent.

For affirmance and modification—Justices CLIFFORD,

SCHREIBER, HANDLER, POLLOCK and O’HERN—S.

Concurring and dissenting in part—Justice PASHMAN—1.

l3a

APPENDIX B

Opinion of the Superior Court of New Jersey

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

180 N.J.Super. 324

Argued Jan. 20, 1981 Decided July 21, 1981

a

In the Matter of the Application of

BOARDWALK REGENCY CORPORATION

For A CASINO LICENSE.

o>

WILLIAM R. GLENDON, New York City, for applicant-appel-

lant Boardwalk Regency Corp. and appellants Caesars World,

Inc. and Caesars New Jersey, Inc. (Wilentz, Goldman &

Spitzer, Woodbridge, attorneys; Morris Brown and Brian J.

Molloy, Woodbridge, of counsel; and Rogers & Wells, New

York City, attorneys; William R. Glendon, Guy C. Quinlan,

John H. Carley and Robert A. Rabbino, Jr., New York City, of

counsel).

IRVING YOUNGER, New York City, for appellants Clifford S.

Perlman and Stuart Z. Perlman (Pitney, Hardin & Kipp,

Morristown, attorneys; Clyde A. Szuch, Murray J. Laulicht,

Marc S. Klein and Stuart M. Feinblatt, Morristown, on the

brief; and Williams & Connolly, Washington, D. C., attorneys;

Edward Bennett Williams, Harold Ungar and Robert B.

Barnett, Washington, D. C., on the brief).

MICHAEL R. COLE, Asst. Acty. Gen., for respondent Attor-

ney General (John J. Degnan, Atty. Gen., attorney; Michael R.

Cole and Andrea M. Silkowitz and Anthony J. Parrillo,

Deputy Attys. Gen., on the brief).

1

l4a

Before Judges FRITZ, POLOW and JOELSON.

—~—

The opinion of the court was delivered by

Fritz, P. J. A. D.

Following extensive investigation and formal hearings on the

application of Boardwalk Regency Corporation (BRC) for a

plenary casino license, the Casino Control Commission (Com-

mission) determined that BRC qualified except for the presence

of Stuart Z. and Clifford S. Perlman, brothers with extensive

interests in the operation. As a consequence, the grant of a

plenary license was conditioned in effect on divestiture of any

Perlman interest which had any capacity for exerting control

over BRC or any related entity. These consolidated appeals by

BRC, Caesars World, Inc. (CWI), Caesars New Jersey, Inc.

(CNJ) and Stuart and Clifford Perlman challenge that ruling

and the constitutionality of N.J.S.A. 5:12-89.

Direct and indirect Perlman interest in and influence upon

the affairs of BRC and ample cause for the insistence of the

Commission that it be persuaded of the qualification of each

of the brothers as a “casino key employee” (N.J.S.A. 5:12-85 c

and d) appear indisputably from the genesis of the corporation

and are in fact not disputed.' BRC is a wholly-owned subsidi-

ary of CNJ, 86% of the stock of which is in turn owned by

CWI. A creature of humble beginnings, CWI was launched in

1956 when Stuart and Clifford Perlman purchased a “Lum’s”

restaurant, a small fast-food eating establishment that special-

ized in hot dogs steamed in beer. The purchase price was

$25,000, “half down and the balance over three years.” About

1965 the Perlmans started franchising the Lum’s stores. Ulti-

mately there were almost 400 of these restaurants in 30 or more

1 One of the expressed concerns of all the appellants is that the

Perlmans are such a prime force in the corporate structure and interstructure

that their departure would seriously impair the capacity of the corporations

to borrow money and otherwise intrude upon the financial operations of the

corporations to their detriment.

1Sa

states. Lum’s was listed on the New York stock exchange in

1969.

1969 was also the year the Perlmans negotiated the purchase

of Caesars Palace for 60 million dollars. In 1971 the recession

in the restaurant business and the need of the growing Caesars

Palace for money produced the sale of the restaurants and the

change of the corporate name to Caesars World.

Today CWI is listed on the New York and Pacific Coast

stock exchanges. Its 26,100,000 shares of outstanding stock are

owned by 70,000 shareholders. Consolidated revenues approx-

imate a half billion dollars annually. Clifford Perlman, chair-

man of the board and chief executive officer of CWI, owns

approximately 10% of the outstanding stock. His brother

Stuart owns about 8% of the stock of CWI and holds the

position of vice-chairman of the board of directors.

At the conclusion of the hearings the Commission noted,

with respect to one of the individuals in the corporate structure

who was found to be qui ‘fied: “As in all areas of human

endeavor, there is in the regulatory process never a situation

absent some scintilla, some particle of doubt.” Nevertheless, it

found qualified for a license the corporation and all the

persons required to qualify by N.J.S.A. 5:12-85 c and d, except

Clifford and Stuart Perlman. Upon clearly articulated findings

and for reasons expressed at length, it announced that it was

unable “to find by clear and convincing evidence that Clifford

Perlman possesses the good character, honesty and integrity

demanded by the Casino Control Act,” and that “BRC has

failed to meet the affirmative responsibility of establishing the

good character, honesty and integrity of Stuart Perlman.” The

suustance of the consequent order was that the application of

BRC for a license would be granted but only upon the

conditions that

. . . both Clifford and Stuart Perlman. . . dispose of

any interest whatsoever which either of them may hold in

Caesars World, Inc., Caesars New Jersey, Inc. or in any

and all subsidiary companies of Caesars World, Inc. in

this or any other jurisdiction; . . . both Clifford and

Stuart Perlman be removed from any position as an

officer, director or employee of Caesars World, Inc.,

16a

Caesars New Jersey, Inc., Boardwalk Regency Corpora-

tion and any and all subsidiary companies of Caesars

World, Inc. in this or any other jurisdiction; . . . [and

that] neither Clifford or Stuart Perlman shall receive any

remuneration in any form, whether for services rendered

or otherwise, from Caesars World, Inc., Caesars New

Jersey, Inc., Boardwalk Regency Corporation, or from

any other subsidiary company of Caesars World, Inc., in

this or any other jurisdiction.

The order further provided for the submission of ‘‘a detailed

plan and timetable for accomplishing the divestiture of all such

securities and removal from all such positions.”’

The Supreme Court “‘suspended”’ “‘the conditions imposed

on the issuance of a license’’ pending ‘“‘disposition of the

pending appeals’’ here being considered.

At the outset we observe that all parties agree, as do we, that

with respect to the factfinding by the agency our obligation is

set and our privilege of independence is limited by Mayflower

Securities v. Bureau of Securities, 64 N.J. 85, 312 A.2d 497

(1973). Basically we search to discover whether the findings of

fact could reasonably have been reached on sufficient credible

evidence present in the record, considering the proofs as a

whole, with due regard for the opportunity of the Commis-

sioners who heard the witnesses to judge of their credibility.

Where expertise is a pertinent fact, we must accord due regard

in that respect as well. We agree with a number of appellants’

contentions in respect to these standards and others governing

our review. First, this search does not require deference to the

Commission respecting factual findings in any area in which

those findings rest upon a determination as to worth, plausibil-

ity, consistency or other tangible considerations apparent from

the face of the record, as to which the Commission is no more

particularly situated to decide them than are we. See Dolson v.

Anastasia, 55 N.J. 2, 7, 258 A.2d 706 (1969). Second, it is

beyond cavil that in the review function the whole record must

be considered. As is expressly pointed out in Mayflower,

supra:

17a

. . « The appellate application of this standard [i.e.,

that of Close v. Kordulak Bros., 44 N.J. 589, 599 [210

A.2d 753] (1965)] requires far more than a perfunctory

review; it calls for careful and principled consideration of

the agency record and findings in the manner outlined in

State v. Johnson, 42 N.J. 146, 161-162 [199 A.2d 809]

(1964). [64 N.J. at 93, 712 A.2d 497]

We also concur that we are “‘in no way bound’’ by the

agency’s interpretation of a statute or its determination of any

strictly legal issue. Mayflower, supra, at 93, 312 A.2d 497.

Finally, the requirement that we defer to the expertise of the

agency is only as compelling as is the expertise of the agency,

and this generally only in technical matters which lie within its

special competence. N.J. Bell Tel. Co. v. State, 162 N.J.Super.

60, 77, 392 A.2d 216 (App.Div.1978). Where, as is apparently

the case here, expertise has not yet developed by experience or

special training, no particular deference need be accorded the

agency’s findings of fact unless there are ‘‘demeanor credibil-

ity’’ factors. We do not suggest by this latter comment that

special expertise exists in the determination of many non-tech-

nical qualities or properties, such as good character, honesty

and integrity. More times than not this type assay calls for the

application of common sense and judgment, after credibiliiy

problems have been solved.

A careful review of the record in testing the findings is vital

to the proper management of a government of laws, for a

determination predicated on unsupported findings is the es-

sence of arbitrary and capricious action. See Thomas v. Morris

Tp. Bd. of Ed., 89 N.J.Super. 327, 215 A.2d 35 (App.Div.

1965), aff'd o. b. 46 N.J. 581 (1966); Morgan v. Saslaff, 123

N.J.Super. 35, 38, 301 A.2d 456 (App.Div.1973). If we are

satisfied after an application of the standards set out above

that the findings of fact do not pass muster, we will not

hesitate to reverse or remand, N.J.S.A. 5:12-110 c(3), or,

inasmuch as the appeal is “‘in accordance with the Rules of

Court,”’ N.J.S.A. 5:12-110 a, make our own findings and

draw our own conclusions. R. 2:10-5; State v. Johnson, 42

N.J. 146, 162, 199 A.2d 809 (1964).

On the other hand, if it appears that the findings might

reasonably have been reached from sufficient credible evi-

dence, we will not disturb them even in cases in which, had we

been doing it, we would have done it differently. Proper

respect for the obligation of the agency to accomplish its

statutory obligations and consideration for implementation of

the legislative intent in the manner designed by the Legislature

causes us to proceed with especial restraint in agency matters.

See New Jersey Guild of Hearing Aid Dispensers v. Long, 75

N.J., 544, 562-563, 384 A.2d 795 (1978). Our original factfind-

ing authority must be exercised only with great frugality and in

none but a clear case free of doubt. See Greenfield v. Dus-

seault, 60 N.J.Super. 436, 444, 159 A.2d 433 (App.Div.1960),

aff'd on majority opinion 33 N.J. 78, 161 A.2d 475 (1960). A

difference of opinion concerning evidential persuasiveness of

relevant testimony certainly does not justify judicial inter-

ference. In re Howard Savings Bk., 143 N.J.Super. 1, 10, 362

A.2d 592 (App.Div.1976). Factual findings of an administra-

tive agency are generally sustained if they are supported by

substantial evidence on the whole record. Atkinson v. Parse-

kian, 37 N.J. 143, 149, 179 A.2d 732 (1962).

We have gone to these lengths in explication of legal issues

probably not the subject of any substantial disagreement be-

tween the adverse factions, in order that the parties might be

expressly advised, at the outset, of the criteria we have em-

ployed in measuring appellants’ challenges. Although we are

tempted to begin with attention to the statute and appellants’

broadside attacks on it, we are satisfied that exploration of the

findings as a first effort, and of appellants’ challenges with

respect to these, will make more meaningful a later consider-

ation of the legislative mandate.

As noted above, the conclusionary finding’ of the Commis-

sion respecting both Perlmans was that it had not been per-

suaded by clear and convincing evidence that either of them

possessed the good character, honesty and integrity required by

the Casino Control Act to qualify for a license. The basic or

2 See the excellent dissertation by the Hon. Milton B. Conford on

“Findings of Facts and Conclusions of Law,”’ 92 N.J.L.J. 225 (1969).

19a

evidentiary facts upon which this conclusion was founded

included among others: Clifford Periman’s ‘‘repeated and

enduring’’ relationship with one Alvin i. Malnik, ‘‘a person of

unsuitable character and unsuitable reputation .. . [who]

associated with persons engaged in organized criminal activi-

ties, and . . . [who had] himself participated in transactions

that were clearly illegitimate and illegal,’’ at times subsequent

to the media identification of an alleged business connection

between Malnik and Meyer Lansky, a reputed organized crime

figure. It was stipulated that the CWI directors were told as

early as July 1971 that although Malnik, once indicted for tax

fraud, had never been convicted of a crime, the ‘‘Federal law

enforcement agencies apparently believed Malnik was involved

in organized crime.’’ The Commission found that the Malnik-

Perlman association persisted long after Clifford Perlman’s

attention was called to the allegations of unsavoriness respect-

ing Malnik’s other friends. Indeed, it found that it persisted

even after Philip Hannifan, chairman of the Nevada Gaming

Control Board, had ‘‘voiced his concerns over Mr. Perlman’s

association with an individual of Mr. Malnik’s reputation,”’

and had received a commitment from Perlman ‘‘to extricate

himself from the Cricket Club fone of the Perlman-Malnik

associations] if Mr. Malnik would not institute a libel suit

against Hank Messick, the author of Lansky.”’

Appellants’ response is impassioned and zealous. They point

to evidence that “[iJn 1972, when Clifford Perlman entered

into the Cricket Club transaction, he had no reason to believe

that there was any obstacle to his doing so. . . . [MJany other

reputable individuais and financial institutions saw no problem

at this time in associating with Malnik.” They explain the

continuance of the Cricket Club relationship by saying that

“Perlman tried repeatedly to sever his connections with the

venture, and subsequently did terminate his ties with the

Cricket Club, after great difficulty and heavy personal finan-

cial sacrifice.” They direct our attention to the fact that “In its

eagerness to make its point, the Commission suppresses the

testimony of Hannafin that he never took Perlman’s expres-

sion of intent to get out of the deal as a commitment.” Both

briefs emphasize that Hannafin, no longer a Nevada official,

testified he was satisfied with Perlman’s efforts.

20a

The foregoing is only one area of several which troubled the

Commission. It is typical of the others. As is most certainly to

be anticipated, a large portion of the testimony was susceptib!s

not only of varying inferences but of varying ccnciusions. In

like fashion, appellants point to substantial areas of testimony

which are highly complimentary and praiseful of the Perlman

brothers, most of it from business and banking.

Appellants claim the Commission distorted the evidence.

Whether by unintentional hyperbole or as a result of faithful

(but we believe misplaced) conviction, they assert that the

findings are “completely unsupported by the record.” These

things are just not so. The Commission chose between conflicts

in evidence, conflicts in available reasonable inferences and

conflicts in conclusions which might be «vn. This was not

only their right, it was their duty. A careful review of the

record convinces us that regardless of evidence to the contrary,

the findings they reached were reasonably available on the

whole record and we will not disturb those findings. Mayflow-

er, supra.

With respect to the contention of Stuart Perlman that his

disqualification, at least, resulted from “administrative after-

thought” on a record where there is “virtually no evidence. . .

directed specifically against him,” we say only that we are in

hearty agreement with the conclusion of the Commission:

“Stuart and Clifford Perlman are more than just brothers.” We

are persuaded, as was the Commission, that the affairs of the

brothers are inextricably entwined. Parenthetically, we observe

that judicious administrative afterthought may well be a salu-

tary purpose of the administrative hearing. What one perceives

to be “afterthought,” another might regard as “careful consid-

eration.”

Appellants Perlman also complain of that which they

characterize as a “procedural inadequacy” respecting the find-

ings of fact. They claim that in marshalling its findings the

Commission ignored (or at least was unconcerned with) “over-

whelming evidence” of distinguished business careers and

model corporate existence of praiseworthy propriety. Citing the

concurring opinion of Justice Handler in Jn re Kessler Mem.

Hosp. Reimbursement, 78 N.J. 564, 573, 578-579, 397 A.2d

2la

656 (1979), they charge that the agency has failed to identify

the evidence it found insufficient.

The Commission did not ignore the favorable testimony.

Quantitating the supportive factual presentation in terms of “a

great deal of evidence,” it said:

In an effort to meet its statutorily imposed burden,

BRC produced a great deal of evidence in support of both

the good reputation of Clifford Perlman and the good

character, honesty and integrity of Clifford Perlman.

Several witnesses testified as to Clifford Perlman’s good

reputation in the financial community, in the casino hotel

industry and in the communities where he lives and

works. Most of these witnesses also testified as to his

good character, honesty and integrity. Suffice it to say

that the Commission has very carefully examined, consid-

ered and weighed ail of this evidence.

It also spoke of the evidence produced “in support of the

qualification of Stuart Perlman all of which has been carefully

examined, considered and weighed.” The distinction between

findings of proof and findings of nonproof or inadequate

proof or proofs which are not creditable, and the consequent

obligations of a reviewing court, are discussed in Kaplowitz v.

K & R Appliances, Inc., 108 N.J.Super. 54, 61-62, 259 A.2d

922 (App.Div.1969), certif. den. 55 N.J. 452, 262 A.2d 706

(1970).

We have no doubt at all respecting “the grounds upon which

the administrative agency has acted, its reasoning, and the

manner in which the evidence of rcord has been transmuted

into ultimate conclusions.” Jn re Kessler Mem. Hosp. Reim-

bursement, supra, Handler, J., concurring, 78 N.J. at 578-579,

397 A.2d 656. We are satisfied that these have been “clearly

disclosed and carefully explained.” /bid. Indeed, it is the clarity

of that explanation that convinces us the Commission as-

suredly heard what was being said by the financial community,

the personal community and the indusiry favorable to the

Perlmans. Despite this, the Commissioners believed the short-

comings to be in fatally critical areas. This is exemplified by a

question posed in their opinion:

22a

Once again, in the absence of any credible explanation

presented in this record, we are left with a serious ques-

tion. Why did Clifford Perlman, in late 1974, lead his

company into its second (and his third) business entangle-

ment with Alvin Malnik, especially in light of his Novem-

ber 1972 discussion with the Chairman of the Nevada

Gaming Control Board?

In the conclusion implicit in this inquiry, and after an

extraordinarily careful review of the record in view of the

importance and novelty of the questions before us, we will not

substitute our judgment for that of the agency. New Jersey

Guild of Hearing Aid Dispensers v. Long, supra.

Although the statute is discussed in greater detail below, we

pause to note that the appellants Perlman at one point in their

brief contend simply that the “Commission’s findings do not

support a bad character conclusion.” Such a conclusion is

unnecessary. The statutory burden to demonstrate affirma-

tively the qualifying attributes, whatever they might be, has

been expressly and clearly placed on the applicant by the

Legislature and is subject to the canon of clear and convincing

evidence. N.J.S.A. 5:12-84, 5:12-89. It is not necessary to

disqualification that the applicant or any personnel required to

be qualified be of demonstrably bad character. Disqualification

is justified by their failure to prove themselves qualified by

clear and convincing evidence. Such evidence is that which

“produce[s] in the mind of the trier of fact a firm belief or

conviction as to the truth of the allegations sought to be

established,” evidence “so clear, direct and weighty and con-

vincing as to enable (the factfinder] to come to a clear convic-

tion, without hesitancy, of the truth of the precise facts in

issue.” Aiello v. Knoll Golf Club, 64 N.J.Super. 156, 162, 165

A.2d 531 (App.Div.1960). Particularly in this sensitive field,

N.J.S.A. 5:12-1 (9); Bally Mfg. Corp. v. N.J. Casino Control

Comm’n, 85 N.J. 325, 331, 426 A.2d 1000 (1981), to doubt is

most certainly to deny.

We turn our attention to the statute. The attack of appellants

ranges wide. The brief filed by the corporate appellants, citing

N.J.S.A. 5:12-1(b)(7) and the 1977 State Commission of Inves-

23a

tigation Report and Recommendations on Casino Gambling,

charges that “the statute’s purpose is clear: it seeks to guard

against any danger of infiltration by organized crime, and at

the same time to protect applicants against being penalized for

innocent associations.” It then argues that the Commission

decided the disqualification solely—although the brief does not

use the word “solely,” it is inescapably implied—“because of

innocent associations wholly unrelated to the statutory pur-

pose,” thus having “misread, and impermissibly broadened,

the statute.”

The argument is subtle, but unpersuasive. We agree entirely

that the statute was intended to guard against any danger of

infiltration by organized crime. This premise is too obvious to

require further elaboration. It is probable as well that reason-

able persons, including legislators, desire to shield corporations

and individuals from penalty where the only offense is “inno-

cent associations.” But it is equally obvious to us that protec-

tion against criminal! elements is not at all the only regulatory

purpose of the statute. The second subsection after that cited

by appellants reads:

Since casino operations are especially sensitive and in

need of public control and supervision, and since it is vital

to the interests of the State fo prevent entry, directly or

indirectly, into such operations or the ancillary industries

regulated by this act of persons who have pursued

economic gains in an occupational manner or context

which are in violation of the criminal or civil public

policies of this State, the regulatory and investigatory

powers and duties shall be exercised to the fullest extent

consistent with law to avoid entry of such persons into the

casino operations or the ancillary industries regulated by

this act.

[N.J.S.A. 5:12-1 b(9); emphasis supplied]

Clearly the Legislature did not intend to limit the power of

disqualification only to situations presenting a danger of in-

filtration by organized crime, or as a matter of fact any other

kind of crime. See N.J.S.A. 5:12-86.

24a

As suggested above, we are not critical of a proposition

denouncing guilt adjudication predicated solely on “unknow-

ing or otherwise innocent association” and are sensitive to the

difficulties defending against such a premise. Again we differ,

however, with appellants’ thesis that such a finding was the

sole cause for disqualification of the Perlmans. For this pur-

pose only, we will assume the impugned associations were

either unknowing or innocent. Nonetheless, it is apparent from

the clear findings of the Commission that it was obviously

disturbed by such things as the then and later apparent insen-

sitivity of the brothers to the potential impact of those associa-

tions upon the industry, those who regulate it, those who

manage it, those who patronize it and the public in general.

This sensitivity on the part of the Commission respecting the

insensitivity on the part of the Perlmans resides safely within

the four corners of the statute where strict regulation is

expressly mandated. The purpose for strict regulation is also

expressly stated: “An integral and essential element of the

regulation and control of such casino facilities by the State

rests in the public confidence and trust in the credibility and

integrity of the regulatory process and of casino operations.”

N.J.S.A. 5:12-1 b(6).

There is nothing inherently wrong with sensitive, strict regu-

lation. It has for many years been exercised in this State in

certain industries. Liquor, with “its inherent evils,” has been

dealt with as “a subject apart.” Grand Union Co. v. Sills, 43

N.J. 390, 398, 204 A.2d 853 (1964). The legislative power to

regulate such a “nonessential and inherently dangerous com-

modity,” as a wholly constitutional expression of concern for

public health, safety, morals or general welfare, has been said

to be almost without limit. /d. at 403-404, 204 A.2d 853. Horse

racing, with attendant legalized gambling, “strongly affected

by a public interest,” has been held to be a “highly appropri-

ate” subject for close regulatory supervision, Jersey Downs,

Inc. v. N. J. Racing Comm’n, 102 N.J.Super. 451, 457, 246

A.2d 146 (App.Div.1968), a condition recognized as desirable

for many years, Niglio v. N. J. Racing Comm’n, 158

N.J.Super. 182, 188, 385 A.2d 925 (App.Div.1978). We see

every reason, including those expressed in N.J.S.A. 5:12-1 b,

25a

for legalized casino gaming to take its deserved place among

those industries. See Bally Mfg. Corp. v. N. J. Casino Control

Comm’n, supra, 85 N.J. at 351, 426 A.2d 1000. Twenty years

before New Jersey enacted the Casino Control Act, Nevada,

the home port of legalized gambling in the United States,

pointed out at least one good reason for strict regulation. In

Nevada Tax Comm’n v. Hicks, 73 Nev. 115, 310 P2d 852

(Sup.Ct.1957), the court declared:

For gambling to take its place as a lawful enterprise in

Nevada it is not enough that this state has named it

lawful. We have but offered it the opportunity for lawful

existence. The offer is a risky one, not only for the people

of this state, but for the entire nation. Organized crime

must not be given refuge here through the legitimatizing

of one of its principal sources of income. Nevada gam-

bling, if it is to succeed as a lawful enterprise, must be

free from the criminal and corruptive taint acquired by

gambling beyond our borders. If this is to be accom-

plished not only must the operation of gambling be

carefully controlled, but the character and background of

those who would engage in gambling in this state must be

carefully scrutinized. [310 P2d at 854]

For the reason there declared and for the several other

reasons set forth in our statute, New Jersey, inspired by

legislative fiat and common sense, must be as careful in the

scrutiny of the character and background of those who would

engage in gambling in this State as is Nevada there.

As Justice Handler recently observed in Knight v. Margate,

86 N.J. 374, 431 A.2d 833 (1981):

At the very heart of the public policy embraced by the

new law is “the public confidence and trust in the credibil-

ity and integrity of the regulatory process and of casino

operations.” N.J.S.A. 5:12-1(b)(6). Related directly to

this purpose, the Legislature stated that “the regulatory

provisions . . . are designed to extend strict State regula-

tion to all persons . . . practices and associations related

to” casinos and that “comprehensive law-enforcement

26a

supervision . . . is further designed to contribute to the

public confidence and trust in the efficacy and integrity of

the regulatory process.” Jd. Because of the need for

integrity, public confidence and trust, it was stressed that

not only persons with criminal backgrounds and associa-

tions but also persons “deficient in business probity”

should be excluded from casino gaming operations.

N.J.S.A. 5:12-1(b)(7). In this vein, because casino opera-

tions “are especially sensitive and in need of public

control and supervision,” the statute dictates that “the

regulatory and investigatory powers and duties shall be

exercised to the fullest extent consistent with law to avoid

the entry” into casino operations, directly or indirectly, of

persons whose economic or occupational pursuits are

violative of the “criminal or civil public policies of this

State.” N.J.S.A. 5:12-1(b)(9). These public policy objec-

tives were augmented by later amendments which declared

that even though “[cjontinuity and stability in casino

gaming opertions” were important, these could not be

achieved by allowing persons with “unacceptable back-

grounds and records of behavior” to control casinos.

N.J.S.A. 5:12-1(b)(15); L. 1978, c. 7, § 1. fat 381-82, 431

A.2d 833}

For these reasons, we disagree with the argument that the

Commission “misread, and impermissibly broadened, the stat-

ute.” We find no overreaching.

The Perlman brief challenges the statute and its application

in two principal respects.’ First, they insist that from the

3 The Attorney General contends that since “[ajt the hearing below

applicants repeatedly referred to the pivotal issue in the case being an

evaluation of the totality of the Perlmans’ character” they ought now to be

deemed to have waived any other “theory now sought to be raised.” The

Perlmans reply that since they are appellants here but were not parties below

they cannct be charged with waiver from the lips of CWI's counsel. This

response has technical merit. Its persuasiveness is impaired by the undeniable

affinity between the Perlmans anc “WI. No matter. In this significant case

of apparent first impression we wil! decide the issues on their merits or lack

thereof.

27a

finding of the Commission, couched as it is in terms of the

failure of the applicant to prove by clear and convincing

evidence the “good character, honesty and integrity” of the

Perlmans, it is apparent that body has gone beyond the

authority delegated and has disqualified the Perlmans on a

ground not permitted by the statute, i. e., the failure to

demonstrate the fact of their good character, honesty and

integrity. The delegation, the Perlmans argue, is limited to an

ascertainment of the reputation for good character, honesty

and integrity. This argument is posited on a theory that the

disqualifying factors set forth in N.J.S.A. 5:12-86 are so

expressly inclusive otherwise that subsection “a” requires

nothing more than literal compliance with N.J.S.A. 5:12-89.

Again we find the argument ingenious, for the latter statute

does indeed refer to the “reputation for good character,

honesty and integrity.” However, we find it unpersuasive be-

cause it ignores the prime objective of statutory construction:

the search for legislative intent. Safeway Trails, Inc. v. Fur-

man, 41 N.J. 467, 477, 197 A.2d 366 (1964), cert. den. 379

U.S. 14, 85 S.Ct. 144, 13 L.Ed.2d 84 (1964). In such pursuit

the intent is to be perceived from the whole statute, and all

parts of the statute must be read so that they are in alignment

with the intent of the entire act. Seatrain Lines, Inc. v.

Medina, 39 N.J. 222, 226-227, 188 A.2d 169 (1963). The

statute must be read mindful of the evil which it is designed to

eliminate and of the proposed remedy. Brewer v. Porch, 53

N.J. 167, 174 (1969). Broad latitude is to be accorded the

probable intent of the Legislature in this regard toward the end

of best serving these beneficent purposes. Continental Cas. Co.

v. Knuckles, 142 N.J.Super. 162, 167, 361 A.2d 44 (App.

Div.1976). Nor will we permit the intent of the Legislature to

be subverted by language which, read literally, appears to

contravene that which the Legislature actually intended. As we

said in Continental Cas. Co. v. Knuckles:

First attention should go to the purpose of the legisla-

tion. “Where a literal rendering will lead to a result not in

accord with the essential purpose and design of the act,

28a

the spirit of the law will control the letter.” N.J. Builders,

etc., Ass’n v. Blair, 60 N.J. 330, 338 [288 A.2d 855]

(1972). It cannot be better put than as by Justice Heher in

San-Lan Builders, Inc. v. Baxendale, 28 N.J. 148, 155

{145 A.2d 457] (1958), “Reason is the soul of law.” [at

167, 361 A.2d 44]

Thus viewed, the Casino Control Act is obviously intended

to disqualify those who cannot demonstrate the fact of good

character, honesty and integrity. As we observed above, the

preambulary declaration of policy establishes the objective of

excluding those who as a matter of fact “have pursued

economic gains in an occupational manner or context. . . in

violation of the ... civil public policies of this State.”

N.J.S.A. 5:12-1 b(9). No suggestion appears in this declaration

that the facts supporting qualities inimical to the general and

salutary purposes of the statute, once found, need be

augmented by a further finding of a reputation for those

qualities.

We acknowledge our responsibility not to ignore the words

used by the Legislature, Hackensack Bd. of Ed. v. Hacken-

sack, 63 N.J.Super. 560, 569, 165 A.2d 33 (App.Div.1960),

and, if possible, to harmonize the meaning of the statute so

that no words or phrases are deemed inoperative, superfluous

or meaningless. Abbotts Dairies v. Armstrong, 14 N.J. 319,

327-328, 102 A.2d 372 (1954). In this case no problem arises

because we do not think the phrase in general and the word

“reputation” in particular were unintended or inadvertent. But

attentive as well to our obligation to make particular words

responsive to the essential principle of the statute, Wollen v.

Fort Lee, 27 N.J. 408, 418, 142 A.2d 881 (1958), we are

persuaded they were employed for a purpose consistent with

the design of the statute other than that suggested by appel-

lants. Obviously, a key employee would be unable to satisfy the

heavy burden of the applicant simply by appearing before the

Commission and assuring its members that he was honest and

diligent and had never held up a bank or even been the victim

of a parking ticket. His avenue is really limited to producing

29a

others who will vouch for his integrity and noncriminality. The

“reputation” language was provided to afford him an opportu-

nity to demonstrate his wares. We are convinced it was not

designed as an incontestable escape valve for one who without

it may have little chance. This is the meaning appellants

attribute to the language. In their brief they insist that once the

Commission found that several witnesses testified as to Clif-

ford Perlman’s good reputation, its “task was properly over at

that point.”

From this it would follow that a parade of friendly witnesses

could override proven disqualifying character facts. We are

certain the Legislature never intended this. We will not in-

terpret a statute so as to produce an unreasonable or absurd

result. State v. Gill, 47 N.J. 441, 444, 221 A.2d 521 (1966).

We are convinced that the authority delegated was to enable

the Commission to determine what the key employee is, rather

than what he is thought to be. If what he is thought to be

satisfies them as to what he is, so be it. That is the true purpose

of the statute and the reason the word “reputation” appears.

Second, the Perlmans complain of the purportedly unconsti-

tutional “vagueness” of the “good character” criterion.

A statute is unconstitutional if it is couched in terms “so

vague that nen of common intelligence must necessarily guess

at its meaning and differ as to its application.” Séate v.

Lashinsky, 81 N.J. 1, 17-18, 404 A.2d 1121 (1979). Neverthe-

less, the fact that certain statutory phrases are not “impeccable

specimens of draftsmanship does not impugn their legality,” as

long as procedural and judicial safeguards are available. Jn

Review of Health Care Admin. Bd. v. Finley, 168 N.J.Super.

152, 167, 402 A.2d 246 (App.Div.1979), aff'd sub nom. New

Jersey Ass’n of Health Care Facilities v. Finley, 83 N.J. 67, 415

A.2d 1147 (1980), app. dism. sub nom. Wayne Haven Nursing

Home v. Finley, 449 U.S. 944, 101 S.Ct. 342, 66 L.Ed.2d 208

(1980).

Furthermore, the words of a statute must not be considered

to exist in a vacuum, without reference to relevant policy

considerations as they are expressed in the whole act, or

30a

without regard for the words of balance of the statute. See

Matawan v. Monmouth Ciy. Tax Bd., 51 N.J. 291, 299, 240

A.2d 8 (1968). It is not too much for the law to expect “men of

common intelligence” to realize this.

We are satisfied that thus viewed, the words “good charac-

ter” in the context of the Casino Control Act leave to men of

common intelligence little doubt about their meaning.

As was said in Jn re DeMarco Suspension, 83 N.J. 25, 414

A.2d 1339 (1980), in connection with a statute regulating

physicians:

The question ultimately is one of fairness, given the

statute and its provisions, and given the situation of the

defendant. Should he have understood that his conduct

was proscribed, should he have understood that the

penalty about to be imposed was the sanction intended by

the Legislature? The test is whether the statute gives a

person of ordinary intelligence fair notice that his conduct

is forbidden and punishable by certain penalties. That

test, however, does not consist of a linguistic analysis

conducted in a vacuum. It includes not simply the lan-

guage of the provision itself, but related provisions as

well, and especially the reality to which the provision is to

be applied. The test here is whether a physician of

ordinary intelligence would have understood, and would

have been given fair notice by virtue of these provisions,

that his conduct rendered him liable to a $200 penalty as

to each patient. [at 37, 414 A.2d 1339]

New Jersey courts have rejected vagueness arguments attack-

ing criteria no more definite than the one at issue. In Jn re

Com’r of Bank v. Parkwood Co., 98 N.J.Super. 263, 273, 237

A.2d 265 (App.Div.1967), the court found that the terms

“incompetency” and “unworthiness” were adequate for judg-

ing the conduct of insurance agents and brokers. In Moyant v.

Paramus, 30 N.J. 528, 552-553, 154 A.2d 9 (1959), a licensing

standard requiring a finding of such “business and moral

character” as deemed “necessary for the protection of the

3la

public good” was held to be sufficiently definite. And see State

v. Rosenthal, 559 P.2d 830, 835 (Nev.Sup.Ct. 1977), app. dism.

434 U.S. 803, 98 S.Ct. 32, 54 L.Ed.2d 61 (1977), in which the

Supreme Court of Nevada, reversing a lower court which had

overturned a gaming commission ruling, held that if the

statutory standards were “inadequate legislative expressions,”

implementing regulations “would serve to cure the defect.”

Over 20 years ago our Supreme Court acknowledged consti-

tutional readjustment whereby

. . . [Im recent days we have attached greater signifi-

cance to the presence of procedural and judicial safe-

guards against unreasonable and unwarranted agency

action than we have to the presence of details in the

statutory standards. See Burton et al. v. Sills, 53 N.J. 86,

91 [248 A.2d 521] (1968), appeal dismissed, 394 U.S. 812,

89 S.Ct. 1486, 22 L.Ed.2d 748 (1969); State v. Owens-

Corning Fiberglass Corp., supra {100 N.J.Super. 366, 242

A.2d 21 (App.Div.1968), aff'd o.b. 53 N.J. 248, 250 A.2d

11 (1969)}, 100 N.J.Super. at 385 [242 A.2d 21]; Esso

Standard Oil Co. v. Holderman, 75 N.J.Super. 455, 474

[183 A.2d 454] (App.Div.1962), aff'd, 39 N.J. 355 [188

A.2d 599] appeal dismissed, 375 U.S. 43, 84 S.Ct. 148, 11

L.Ed.2d 107 (1963). [Motyka v. McCorkle, 58 N.J. 165,

178, 276 A.2d 129 (1971)]

The matter comes down to a response to the dispositive

inquiry posed in State v. Lashinsky, supra:

. . . The decisive question for purposes of this vague-

ness argument is whether the defendant was reasonably

apprised, as a matter of common intelligence, in light of

ordinary human experience, that his particular conduct

was unlawful.‘ [81 N.J. at 18, 404 A.2d 1121]

4 Of course, the Perlmans are not defendants in the criminal sense as

was Lashinsky, and no one suggests that their conduct was unlawful. The

principle is no different.

32a

We are wholly persuaded that the potential key employee is

reasonably apprised by the statute, as a matter of common

knowledge, in the light of ordinary human experience, as to the

kind of conduct necessary to satisfy the statute (or put another

way, the kind of conduct which is likely to result in disqualifi-

cation). He is reasonably apprised as well of precisely what will

happen if he does not pass muster.

This being so we are content that there was no lack of

fairness with respect to the Perlmans, whose sophisticated

knowledge of the casino gaming industry and long-time experi-

ence with its standards and regulations was far from ‘‘or-

dinary.’’ In fact, their plaint in this respect loses much of its

thrust in view of the fact that whatever else it did or did not

do, the Nevada Gaming Commission advised them of its

decidedly negative reaction to the conduct which the New

Jersey Casino Control Commission found offensive eight years

later.

Coupled with this vagueness issue the Perlmans also urge

that a ‘‘good character’’ criterion ‘‘allows [the Commission] to

rely upon guilt by association.’’ The brief for the corporations

iterates this arguinent, in effect, and claims a due process

violation, citing Schware v. Board of Bar Examiners, 353 U.S.

232, 77 S.Ct. 752, 1 L.Ed.2d 796 (1957). As we have indicated

above, it is abundantly clear to us from the opinion of the

Commission that the Perlmans were not rejected because of

any ‘“‘guilt’’ on their part in the criminal or quasi-criminal

sense or because of their association with persons, some of

whom, if not guilty, were almost universally thought to be.

Rather, they were rejected, among other things, because, as we

said above, of their apparent continuing insensitivity to the

potential impact of those associations in this sensitive industry.

The present protestations of the fact that those transactions

were, at the time ‘awful and ethical’’ (emphasis is the

Perlmans’) demonstrate that the sensitivity has not increased.

The question was not then, and is not now, whether those

transactions were lawful, or how lawful, or ethical, or how

ethical. The question which the Perlmans failed to see then

and, perhaps understandably, do not now acknowledge, is:

33a

what of the impact of those transactions and associations upon

the policies intended to be served by casino gaming regulation

under legislative imprimatur? Schware reports that in that

matter ‘‘[t}here is nothing in the record which suggests that

Schware has engaged in any conduct during the past 15 years

which reflects adversely on his character.’’ 353 U.S. at 239, 77

S.Ct. at 756. That statement cannot be made for the Perlmans,

if good character in the sense here appropriate is deemed to

refer to conduct not potentially detrimental to the industry. In

the context of the statutes, no other definition is reasonable.

Knight v. Margate, supra. Schware and others like it are

distinguishable.

Both appellants’ briefs also argue that since the order of the

Commission requires a termination of the Perlman relationship

with CWI and its subsidiaries ‘‘in this or any other jurisdic-

tion,’’ as a condition of BRC licensing, it offends the Com-

merce Clause, U.S.Const., Art. I, § 8, by imposing an

unreasonable burden on interstate commerce. The fallacy in

this argument is that the order is said to purport ‘“‘to regulate

the management of substantial non-New Jersey operations

. . and to limit the Perlmans’ business activities outside of

New Jersey,’’ when in fact it does no such thing. It neither

regulates CWI or any of its subsidiaries except BRC or the

Perlmans, nor tells them what they must do. It only tells BRC,

in terms completely in line with the statute and its purposes,

the condition which must exist in view of its corporate connec-

tions, before it can enjoy the privilege of a casino license. No

one will argue that New Jersey does not have a legitimate local

public interest in determining who shall be thus licensed in New

Jersey and under what conditions. We are satisfied this issue

has no merit and warrants no further discussion.

We are agreed, however, that the legitimate state interests

otherwise being served do not require or reasonably permit the

requirement of disassociation of the Perlmans’ personal in-

terests from non-New Jersey subsidiaries of CWI which have

no gaming activities. The State advances a so-called ‘‘percolat-

ing up’’ concern, theorizing that Perlman influence may work

its way up the interstructure and manifest itself in CWI (and

34a

thereafter BRC) affairs, despite the disassociation there. Such

a result is not at all inconceivable. Nevertheless, we believe the

effect thus projected would be sufficiently attenuated that its

force would not exceed the influence the Perlmans might

continue to exert as old and experienced friends, even after

divestiture. We are satisfied that neither of these is susceptible

to New Jersey regulation consistent with due process. It is not

insignificant that the Commission continues to retain jurisdic-

tion over its licensees. If a ‘‘Perlman effect’’ becomes mani-

fest, the Commission is not powerless. N.J.S.A. 5:12-129.

Finally, the corporations argue that the evidence supporting

the Commission’s finding that Malnik was a person of unsuit-

able character was ‘‘irrelevant, inadmissibic and legally insuffi-

cient.’’ The argument is entirely frivolous. The protesting brief

points out the relevance of ‘‘what the Perlmans knew about

Malnik between 1971 and 1975.’’ N.J.S.A. 5:12-107 a(6) takes

care of the balance. See also, N.J.A.C. 19:42-2.6. In re Toth,

175 N.J.Super. 254, 418 A.2d 272 (App.Div.1980), cited by

appellants, is of no avail to them. In the matter before us there

was an ample residuum of legal and competent evidence to

sustain the administrative decision. Weston v. State, 60 N.J.

36, 51, 286 A.2d 43 (1972).

Except respecting the requirement of divestiture as it applies

to non-New Jersey nongaming subsidiaries of CWI, we affirm

the administrative determination. We remand to the Casino

Control Commission for recasting of the order consistent with

the foregoing and for reasonable revision of the timetable. The

stay imposed by the Supreme Court shall remain in effect

pending the recasting of the order of the Commission and

thereafter until further order of this court or the Supreme

Court on motion. Other than with respect to the stay as noted,

we do not retain jurisdiction.

35a

APPENDIX C

Opinion of the New Jersey Casino Control Commission

STATE OF NEW JERSEY

CASINO CONTROL COMMISSION

Docket No. 80-CL-1

November 13, 1980

>

In the Matter of

THE APPLICATIONS OF BOARDWALK REGENCY CORPORATION

AND THE JEMM COMPANY FOR CASINO LICENSES.

>

NEW JERSEY CASINO CONTROL COMMISSION

Joseph P. Lordi, Chairman

Martin B. Danziger, Vice-Chairman

Don M. Thomas, Commissioner

Carl Zeitz, Commissioner

Madeline H. McWhinney, Commissioner

APPEARANCES:

For Boardwalk Regency Corporation:

William R. Glendon, Esq.

Rogers and Wells, Esqs., New York, New York

Morris Brown, Esq.

Wilentz, Goldman & Spitzer, Esqs., Woodbridge,

New Jersey

Richard H. Sheehan, Esq., Vice President-Law

Caesars World, Inc., Los Angeles, California

For the Jemm Company:

James L. Cooper, Esq.

Cooper, Perskie, Katzman, April, Niedelman &

Wagenheim, Esqs., Atlantic City, New Jersey

36a

For the Division of Gaming Enforcement:

Michael R. Cole, Assistant Attorney General

Joan Robinson Gross, Deputy Attorney General

Anthony J. Parillo, Deputy Attorney General

For the Casino Control Commission:

R. Benjamin Cohen, General Counsel

Joseph A. Fusco, Special Counsel for Licensing

I.

INTRODUCTION

On * sxember 1, 1978, Boardwalk Regency Corporation

(“BRC”) applied to the Casino Control Commission for a

casino license. In accordance with the Casino Control Axt

(“the Act”), the Commission requested the Division of Gamiag

Enforcement (“Division”) to conduct a comprehensive investi-

gation into BRC’s qualifications. While the investigation was

in progress, BRC proceeded with its reconstruction and expan-

sion of the former Howard Johnson’s Regency Hotel. On

April 30, 1979, with completion of its facility approaching,

BRC formally requested issuance of a temporary casino permit

which the Commission is authorized to grant upon the filing of

certain corporate information, the institution of an appropri-

ate voting trust agreement and the establishment of the suita-

bility of the proposed casino hotel facilities. See N.J.S.A.

5:12-95.1. After conducting a hearing on this request, the

Commission found that, subject to certain conditions, BRC

met the requirements for a temporary casino permit. The

Commission then issued such a permit which became effective

on June 26, 1979. That permit expired at midnight on October

26, 1980. As noted, the statutory requirements for a temporary

casino permit were limited to areas which did not concern the

suitability of the applicant or other persons required to be

qualified for a casino license.

As the landlord and lessor of the casino hotel facility, the

Jemm Company (“Jemm”) is required by Section 82 of the Act

37a

to apply for and obtain a casino license. N.J.S.A. 5:12-

82(c)(2). Jemm did apply for such license on or about February

26, 1979. In the usual course, the matter was referred to the

Division for investigation.

On January 23, 1980, the Division filed its “Report to the

Casino Control Commission with Reference to the Casino

Li noc Application of Boardwalk Regency Corporation” (the

“BRC Report”). Along with the BRC Report, the Division

filed a “Statement of Issues” emphasizing several matters

which the Division deemed significant. On February 1, 1980,

the Division filed its “Report to the Casino Control Commis-

sion with Reference to the Casino License Application of

Jemm Company, a Partnership.” These documents were sub-

mitted by the Division pursuant to its statutory responsibility

to investigate the qualifications of each applicant and to

provide all necessary information to the Commission.

N.J.S.A. 5:12-76. Although they assist the Commission in

focusing its inquiry into the qualifications of the applicants,

these documents are not evidence of the matters stated therein.

Nor did the Report and Statement of Issues initiate the present

hearing. The Casino Control Act requires a hearing on every

casino license application and each applicant must meet the

Statutory criteria regardless of ihe tenor of the Division’s

report. See N.J.S.A. 5:!?-S0(a) and -87(a).

In order to expedite the proceedings and to fairly permit the

parties to prepare for the hearing, six (6) pre-hearing con-

ferences were conducted. Those conferences resulted in six (6)

pre-hearing conference orders delineating the factual matters

which were to be the primary subjects of the hearing. Essen-

tially, those subjects concern the areas described in the Divi-

sion’s reports. Further, the applicants and the Division have

entered into extensive stipulations of fact relevant to those

areas. These stipulations have been accepted by the Commis-

sion. As to any other factual matters not placed in issue nor

actually litigated during the hearing, it must be assumed that

such matters pose no cause for concern. In this regard, the

Commission took notice of the fact that the applicants have to

38a

date filed numerous documents which pertain to uncontested

matters and which were not introduced at the hearing.

Sections 84 and 89(b) of the Act set forth the criteria which a

casino license applicant and other persons required to be

qualified as a condition of such licensure must affirmatively

establish by clear and convincing evidence. N.J.S.A. 5:12-84

and 89(b). The clear and convincing evidence requirement falls

between the ordinary civil standard of “preponderance of the

evidence” and the criminal standard of “beyond a reasonable

doubt.” The preponderance standard means simply that when

the record is considered as a whole the credible evidence

renders the existence of the fact in question more likely than

not. In contrast, the familiar criminal standard means that the

trier of fact must not have a reasonable doubt, that is, one

based on the evidence or the lack of evidence. A reasonable

doubt is one which has some justification rather than an

imaginary or possible doubt. The clear and convincing stan-

dard is much higher than the preponderance standard but

somewhat less than the reasonable doubt requirement. Clear

and convincing evidence should produce in the mind of the

Commissioner a firm belief or conviction as to the truth of the

matters sought to be established. In order to sustain its burden,

the applicant was obliged to present clear and convincing proof

of the facts upon which the Commission may reach a reason-

able conclusion as to suitability. Further, the Act requires that

four of the five Commission members must concur in any

necessary finding for casino licensure. N.J.S.A. 5:12-73(d).

As noted, a casino license applicant must establish by clear

and convincing evidence that it meets the criteria of Section 84

and that the persons who must be qualified meet the criteria of

Section 89(b) for casino key employees. For BRC, a corporate

applicant, the persons required to so qualify are described in

Sections 85(c) and 85(d) of the Act. Under Section 85(c), the

following persons connected with BRC must qualify:

(a) each officer;

(b) each director;

39a

(c) each person holding any beneficial interest, direct or

indirect, in the securities of the applicant corpora-

tion;

(d) any person who in the opinion of the Commission

has the ability to control the corporation or elect a

majority of the board of directors of the corpora-

tion, other than a bank or other licensed lending

institution which holds a mortgage or other lien

acquired in the ordinary course of business; and

(e) any lender, underwriter, agent or employee of the

applicant corporation or other person whom the

Commission considers appropriate for qualification.

Under Section 85(d) the officers, directors, lenders, under-

writers, agents, employees and securities holders of Caesars,

New Jersey, Inc. (the intermediary company) and Caesar’s

World, Inc. (the holding company) must qualify to the stand-

ards under Section 89, except residency. However, since both

the intermediary company (“CNJ”) and the holding company

(“CWI”) are publicly traded corporations, the Commission

and the Director of the Division may agree to waive such

qualification requirements as to any person who is not signifi-

cantly involved in the activities of BRC and who does not have

the ability to control the holding company or the intermediary

company or to elect one or more directors thereof.

As to Jemm, the partnership which leases the casino hotel

facility to BRC, Section 85(e) of the Act requires the following

persons to be qualified to the standards for casino key employ-

ees, except for residency:

(a) each person who directly or indirectly holds any

beneficial interest or ownership in the partnership

applicant;

(b) any person who in the opinion of the Commission

has the ability to control the partnership applicant;

and

(c) any person whom the Commission considers appro-

priate for qualification.

40a

During the pre-hearing conferences, the Division submitted a

list of persons whom the Division deemed required to be

qualified for both BRC and Jemm. The Division also indicated

those individuals to whom it interposed an objection and the

grounds for such objection. These materials were provided to

the Commissioners and the parties. The Commission found

that there are thirty persons who must be qualified as part of

the BRC application and eight persons who must be qualified

as part of the Jemm application. At the conclusion of the

hearing, the Division objected to four of the BRC “qualifiers,”

namely, Clifford S. Perlman, Stuart Z. Perlman, Jay E.

Leshaw and William H. McElnea, Jr. No objection was inter-

posed regarding any of the Jemm qualifiers.’

As to the licensure standards themselves, Sections 84 and

89(b)(2) establish essentially the same qualification criteria

which must be established by clear and convincing evidence for

the applicants and the persons to be qualified. The first

affirmative qualification criterion is that of “financial stability,

integrity and responsibility.” N.J.S.A. 5:12-84(a); N.J.S.A.

5:12-89(b). The second criterion appears in Section 84(c) and

Section 89(b)(2). Although the wording varies slightly between

these sections, the thrust is the same. A casino licensee appli-

cant or person required to qualify must demonstrate its “repu-

tation for good character, honesty and integrity.” N.J.S.A.

5:12-89(b)(2). The third criterion demands that the applicant or

qualifying person possess “sufficient business ability and ca-

sino experience as to establish the likelihood” that the appli-

cant will create and maintain “a successful, efficient casino

operation” or that the qualifying person will achieve “success

and efficiency in the particular position involved.” N.J.S.A.

5:12-84(d); N.J.S.A. 5:12-89(b)(3). A fourth affirmative crite-

rion applies only to the casino license applicant which must

1 Prior to the hearing, the Division stated its opposition to Mark A.

Geller, who resigned his position as vice-president for BRC’s casino opera-

tions and who took a leave of absence from his office in CWI. Mr. Geiler’s

qualifications are the subject of a separate proceeding and will be determined

by the Commission apart from the instant matter.

4la

establish the “integrity and reputation” of all financial inves-

tors or lenders whose investments or loans are related to the

Atlantic City casino hotel project.’

As mentioned earlier, the Division filed investigative reports

as to both the BRC application and the Jemm application. In

addition, the Division submitted a “Statement of Issues” in

which it enumerated 13 areas of concern covered by the BRC

report. The Commission received evidence on these areas and

considered that evidence in determining whether BRC had met

the affirmative qualification criteria. However, certain “issues”

as developed on this record simply were not of the same force

and importance as others. The matters which truly concerned

the Commission were those which are related in the opinions

regarding the four challenged BRC qualifiers. With respect to

the otherwise unmentioned issues, the Commission found on

this record no reasons to seriously question the suitability of

the applicants or persons to be qualified. Since the real diffi-

culties with the BRC application concern the persons to be

qualified, we now consider those individuals.

Il.

PERSONS REQUIRED TO QUALIFY

A. CLIFFORD S. PERLMAN

Clifford S. Perlman who presently resides in Miami,

Florida, was born on March 30, 1926, in Philadelphia, Penn-

sylvania and was educated in the Philadelphia public schools.

After attending Temple University for a short time, he com-

2 At the hearing, the Chairman distributed to the Commissioners and

to the parties a proposed written instruction on the licensing criteria and the

decisional process. After considering the exceptions filed by the parties, the

Chairman modified the proposal in two respects. The written instruction, as

modified, was adopted by the Chairman for the guidance of the Commission

and the edification of the parties. It is not necessary to restate the instruction

here since it is part of the record. Moreover, the meaning of the pertinent

standards and their application to the contested matters in this case are

apparent from the opinions of the Commission members herein.

42a

pleted his undergraduate education at the University of Miami

and proceeded to obtain a law degree from the same institution

in 1951. He has been a member of the Bar of the State of

Florida since 1951.

Caesars World Inc. (“CWI”) was formed in 1958 as “Lum’s

Bar, Inc.” by Clifford Perlman and his brother, Stuart, to

operate a small restaurant in Miami Beach, Florida which the

brothers had purchased in 1956. By 1969, the Perlmans had

built the corporation into a publicly-held (over-the-counter)

company which operated or franchised approximately 380

fast-food restaurants. The company also acquired in the late

1960’s a Florida-based producer and distributor of processed

meats (Dirr’s Gold Seal Meats) and a chain of more than 100

retail discount stores (Dade Wholesale Products). On Septem-

ber 30, 1969, Lum’s acquired Caesars Palace in Las Vegas,

Nevada. Within the next two years, Lum’s disposed of Dirr’s

Gold Seal Meats and Dade Wholesale Products and its fast-

food restaurants. In December 1971, the name of the corpora-

tion was changed from Lum’s to Caesars World. Clifford

Perlman was the primary catalyst in changing the direction of

the company from the fast-food business to the casino hotel

business.

Caesars World Inc. is today a publicly traded corporation,

the stock of which is listed on the New York and Pacific stock

exchanges. The approximately 26,100,000 shares of the com-

pany are owned by about 70,000 shareholders. Through sub-

sidiaries, CWI presently owns and operates Caesars Palace

Hotel and Casino in Las Vegas, Nevada, Caesars Tahoe Hotel

and Casino in Stateline, Nevada, and Boardwalk Regency

Hotel and Casino in Atlantic City, New Jersey. Through other

subsidiary companies, CWI owns real estate and operates a

country club in southern Florida, operates three honeymoon

resorts in the Pocono Mountain area of Pennsylvania, and

owns a computer terminal manufacturing company based in

New York. In fiscal 1980, the gross revenues of CWI exceeded

$500,000,000.

Clifford Perlman is Chairman of the Board of Directors and

chief executive officer of both CWI and Caesars New Jersey,

43a

Inc. (“CNJ”).’ He is the largest single stockholder of CWI,

owning approximately 2.4 million shares, or about 10% of the

outstanding stock. In addition, he owns approximately 221,000

shares of CNJ, or about 1.4% of the outstanding stock of that

company. Clifford Perlman clearly is today, and has been since

the beginning, the acknowledged leader and prime mover of

CWI.

By virtue of his positions as an officer, director, major

stockholder and principal employee of CWI and CNJ, Clifford

Perlman is a person who must individually be qualified for

approval as a casino key employee (except for New Jersey

residence) in order for Boardwalk Regency Corporation

(“BRC”) to be eligible to hold a casino license. BRC therefore

has the affirmative responsibility to establish by clear and

convincing evidence Clifford Perlman’s “financial stability,

integrity and responsibility,” his “good character, honesty and

integrity,” and his “business ability and casino experience.”

With regard to Clifford Perlman, the bulk of the evidence

presented to the Commission relates to the licensure criteria of

“good character, honesty and integrity.” To determine an indi-

vidual’s “good character, honesty and integrity,” the Act re-

quires the Commission to examine, among other factors, the

individual’s “family, habits, character, criminal and arrest

record [if any], business activities, financial affairs, and busi-

ness, professional and personal associates.”

In an effort to meet its statutorily insposed burden, BRC

produced a great deal of evidence in support of both the good

reputation of Clifford Perlman and the good character,

honesty and integrity of Clifford Perlman. Several witnesses

testified as to Clifford Perlman’s good reputation in the

financial community, in the casino hotel industry and in the

3 Mr. Perlman has been on unpaid leave of absence from his position

with CWI and CNJ and has been prohibited from taking any management

position with BRC since June 26, 1979, the effective date of the BRC

temporary casino permit. Mr. Perlman agreed to this arrangement in re-

sponse to concerns raised by the Division which was then continuing its

investigation of Mr. Periman’s and CWI’s dealings with Messrs. Mainik and

Cohen.

d4a

communities where he lives and works. Most of these witnesses

also testified as to his good character, honesty and integrity.

Suffice it to say that the Commission has very carefully

examined, considered and weighed all of this evidence.

The Division of Gaming Enforcement has recommended

that this Commission find Clifford Perlman unsuitable for

qualification. In support of its recommendation the Division

has adduced evidence which it contends reflects adversely on

the good character, honesty and integrity of Clifford Perlman.

This evidence may be most conveniently considered in the

context of the four major areas which were closely examined at

the hearing.

1. ACQUISITION OF CAESARS PALACE

CWI’s (then Lum’s, Inc.) entry into the casino gaming

business was marked by the purchase of Caesars Palace in 1969

for approximately $58 million. The Caesars Palace venture was

largely the initiative of Clifford Perlman. it was Clifford

Perlman who discovered the deal for the company and who

established the purchase price at a multiple of earnings not to

exceed $60 million.

At the time of acquisition, CWI retained prior management

to run the casino operation without conducting a background

study or investigation of any of the individuals, relying instead

on their general reputation in the gaming community. One of

these individuals was Jerome Zarowitz, the Director of Casino

Operations, responsible for the day to day operations of the

casino. He was then not required by the Nevada authorities to

be licensed as a casino key employee. Although not a record

owner of the Palace, Mr. Zarowitz received $3.5 million in cash

upon the consummation of the acquisition from the former

owners and received further monies on a deferred compensa-

tion plan, which CWI was obligated to fund.

Mr. Zarowitz had a known criminal record and by the latter

part of 1969, was considered by Clifford Perlman unsuitable to

operate the casino at Caesars Place. While Mr. Zarowitz was

still in charge of the casino, Clifford Perlman was aware of

4Sa

reports concerning Mr. Zarowitz’ attendance at a so-called

“little Appalachia” meeting of reputed organized crime mem-

bers in Palm Springs in 1965. And Clifford Perlman was also

aware that the Nevada Gaming Control Board had expressed

concerns about Mr. Zarowitz’ suitability for licensure and that

his employment at Caesars Palace might have to be termi-

nated. Notwithstanding this knowledge, CWI retained Mr.

Zarowitz in his same executive capacity after the purchase

settlement on September 30, 1969, until his resignation in

April, 1970. Moreover, he was allowed to occupy an apartment

at Caesars Palace on a complimentary basis for a period of

time after his termination of employment. And, CWI replaced

him with Sanford Waterman, on Mr. Zarowitz’ own recom-

mendation.

Between May 1, 1969, shortly after CWI entered into the

agreement to purchase Caesars Palace, and September 30,

1969, when that purchase was completed, Caesars Palace

suffered a loss of $932,266 before taxes, while continuing to be

operated by the previous owners including Mr. Zarowitz.

During the same period in the prior year of 1968, Caesars

Palace had a profit before taxes of $2,230,014. Although

professing concern over this drop in casino win, CWI ac-

cepted, without any independent investigation, the explanation

tendered by Mr. Zarowitz and other personnel of the former

owners that losses during the settlement period were due to

patron win at the baccarat tables and, generally, to the fortunes

of gaming. Indeed, CWI did nothing to confirm Zarowitz’

explanation. Neither its Board of Directors nor management

raised, or even considered, the possibility of an independent,

outside audit of the records for the operation of the Caesars

Palace casino during the settlement period. To do any such

investigation, according to Clifford Perlman, would have dis-

turbed the delicate negotiations then in progress between CWI

and the previous owners over restructuring the financing as-

pects of the deal, occasioned by CWI’s inability to adhere to its

original plan of financing. In Clifford Perlman’s words, “If I

had accused them [the prior owners] of stealing, we would not

have bought the hotel.”

46a

On December 12, 1970, the Federal Bureau of Investigation,

acting under the supervision of Harold E. Campbell, Jr., then

Special Agent in Charge of the Bureau’s Nevada Regional

Division, and having cause to believe the existence of an illegal

interstate gamblii.g operation, executed search and arrest war-

rants at Caesars Palace. In the course of the search, the agents

uncovered funds in lockboxes listed to Mr. Zarowitz

($1,100,000), Elliot Price ($325,000) and Sanford Waterman

($135,000). Mr. Waterman and Mr. Price, who were casino

executives at Caesars Palace at the time, were arrested as a

result. Apparently, neither Clifford Perlman, who took per-

sonal charge of the Palace after this occurrence, 1or anyone

else on behalf of CWI confronted Mr. Zarowitz, Mr. Price or

Mr. Waterman regarding this event or made any independent

attempt to ascertain the source of these monies.

On January 27, 1971, the Securities and Exchange Commis-

sion (“SEC”) ordered an examination and investigation into

ihe possibility that CWI did not receive a substantial portion of

the results of the casino proceeds of Caesars Palace for the

summer of 1969 because the prior operators had been “skim-

ming” the casino revenues during that period. In the course of

its hearings in this matter, the SEC subpoenaed, among others,

the former principal owners of Caesars Palace and its key

casino employees, including: William Weinberger, Sr., who at

the time was President of Caesars Palace; Harry Wald, then

Secretary-Treasurer of Caesars Palace (now Executive Vice

President, Secretary and Director of Desert Palace, Inc., a

wholly-owned subsidiary of CWI), Albert Faccinto (now Sen-

ior Vice President with Desert Palace, Inc.), Jerry Gordon and

Bert Grober. All these individuals refused to testify, most

invoking their constitutional privilege against self-incrimina-

tion. This fact came to the attention of Clifford Perlman who,

once again, made no attempt to interview any of his employees

about their possible knowledge that others may have been

sharing in Caesars Palace revenues through skimming.

One of these employees, Jerry Gordon, had been indicted on

March 25, 1971, along with Samuel Cohen, Meyer Lansky,

Morris Lansburgh and others for income tax evasion arising

47a

from an alleged skimming operation at the Flamingo Hotel, a

neighboring casino. Aithough professing shock over the indict-

ment, Clifford Per!man never inquired of Gordon whether he

knew of possible skimming at Caesars Palace under its prior

ownership. Quite to the contrary, when Nevada gaming

authorities sought Gordon’s dismissal from Desert Palace,

Inc., by reason of his indictment, Clifford Perlman directed

William Weinberger (then President of Desert Palace, Inc.) to

intervene in the matter. After a series of correspondence

between Weinberger and the Nevada Gaming Control Board,

Mr. Gordon was allowed to take a temporary leave of absence.

Another employee of Caesars Palace who had pled the Fifth

Amendment before the SEC was Joel Snow. Mr. Snow had

been rehired at Caesars Palace one year after his termination

for a $1,000 shortage in the baccarat pit. He also was never

asked about the drastic drop in casino winnings during the

1969 acquisition settlement period.

From the foregoing, certain conclusions are self-evident.

Despite an awareness of Mr. Zarowitz’ criminal conviction and

his general unsuitability in the eyes of Nevada gaming officials,

CWI, through Clifford Perlman, retained him in a position of

responsibility and authority within the casino, allowed him to

live on the premises rent free after his resignation, accepted

without further inquiry his explanation for casino losses and

followed his recommendation that he be replaced by Sanford

Waterman. Unquestionably, Mr. Zarowitz’ record as well as the

sensitivities exhibited by Nevada gaming authorities should

have disabused Clifford Perlman of any such trust and re-

liance. In the face of an official SEC investigation into the

possibility of skimming at Caesars Palace under its prior

owners—a charge which strikes at the heart of the regulatory

concerns—CWI’s apparent lack of diligence in ascertaining the

truth of this allegation is disturbing, especially since individ-

uals with possible relevant knowledge remained in CWI’s

employ. Two of these employees, Joel Snow and Jerry Gordon,

in particular, should have given CWI cause for concern—in-

deed, Jerry Cordon at this time had just been indicted for an

alleged skimming operation at the nearby casino, the

Flamingo.

48a

Of course, the nature and relevance of these events must be

considered in the context in which they occurred. Clifford

Perlman and CWI were new to the casino gaming industry.

Nevertheless, at the very least, the facts outlined above relating

to the acquisition of Caesars Palace should have raised Clif-

ford Perlman’s consciousness concerning the sensitive nature

of this industry and concerning the regulatory process under

which it operates.

2. SKY LAKE NORTH

In the late spring of 1971, Alvin I. Malnik, a principal along

with Samuel E. Cohen of Comal Corp., approached CWI

President Melvyn Chasen about the possibility of CWI

purchasing property in Dade County, Florida known as Sky

Lake North. A previous overture to this effect had been

rejected by Clifford Perlman in 1970. The Sky Lake property

consisted of about 623 acres including a country club, lakes

and approximately 325 acres of developable land owned by

Comal. In the 1971 offer, the price was set by Malnik at $23

million. More specifically, CWI was to assume an existing $10

million mortgage debt to the Central States, Southeast and

Southwest Areas Pension Fund (Teamsters Pension Fund) and

undertake a $13 million purchase money mortgage to Comal.

These terms appeared attractive to Clifford Perlman.

At a July 1971 meeting at Sky Lake, Mr. Malnik along with

Samuel Cohen presented their proposal to certain representa-

tives of CWI including Clifford and Stuart Perlman, William

McElnea, Jay Leshaw, Bertin Perez and CWI’s outside coun-

sel, David Bernstein of Rogers & Wells. Aliso by this time, Mr.

Malnik was proposing to sell the stock of Comal to CWI,

rather than having CWI purchase the property outright, and

seeking as part of the transaction, to acquire rights to CWI

stock.

Sometime later in July 1971, CWI’s Board of Directors met

and considered the proposed transaction. Certain aspects of

the deal were discussed including the reputations of Mr. Malnik

and Mr. Samuel Cohen. The Board was told: that Mr. Malnik

49a

had been accused, in a book entitled Lansky by one Hank

Messick, of being a close associate of Meyer Lansky; that Mr.

Malnik denied such association; and that federal law enforce-

ment authorities apparently believed Mr. Malnik was involved

in organized crime. They were told that Mr. Malnik had once

been indicted for tax fraud, but that he had received a directed

verdict of acquittal, and that he had never been convicted of a

crime. Board members were also informed of Mr. Cohen’s

violation of the Commodity Exchange Act.

At this meeting, David Bernstein expressed his concern over

entering this transaction, given Mr. Malnik’s reputation. As

outside counsel, Mr. Bernstein recommended seeking the Jus-

tice Department’s approval before consummating the deal. The

Board rejected this advice, however, as a bad precedent, and as

a poor business move. CWI’s directors felt that the reputations

of Mr. Malnik and Mr. Cohen should not preclude the com-

pany from the undertaking at hand and consequently decided

to proceed with the transaction. Mr. Bernstein’s concerns

remained unabated but, he was eventually dissuaded by Clif-

ford Perlman from again addressing the issue before the

Board.

All of CWI’s outside directors were not made aware of every

important aspect of Mr. Cohen’s background at the time of the

Board’s July 1971 approval of the Sky Lake transaction. In

fact, Mr. Cohen had been indicted together with Meyer Lansky

and others in March 1971, for income tax evasion arising from

an alleged casino skimming operation at the Flamingo Hotel in

Las Vegas. Clifford Perlman was aware of Meyer Lansky’s

reputation. Clifford Perlman also knew of the Flamingo skim-

ming indictment involving Messrs. Cohen, Lansky and others

when it was returned in March 1971. Indeed, one of Mr.

Perlman’s employees, at Caesars Palace, Jerry Gordon, had

been charged as a co-defendant in the same indictment. Stuart

Perlman knew of the Flamingo skimming indictment at the

time of its filing, as did Jay Leshaw, since it was extensively

reported in the news media of Miami where both resided.

However, Mr. Cohen’s then pending indictment with Meyer

Lansky and Caesars Palace employee Jerry Gordon was not

50a

discussed with William McElnea and the other outside direc-

tors of CWI. Clifford Perlman testified that he did not

consider it a sensitive issue. Stuart Perlman testified that he

“assumed” all directors knew, even though the subject of Mr.

Cohen’s indictment was never raised or discussed at the same

Board meeting in which Mr. Cohen’s conviction for a com-

modities violation was disclosed. Jay Leshaw testified that at

the time of the Board meeting he focused on the architectural

and land development aspects of the deal rather than on the

character and backgrounds of those with whom his company

was entering into a business relationship.

Based on the foregoing, the following findings are inescap-

able. In 1971, CWI’s Board of Directors was faced with the

prospect of entering into a major business relationship with

two men of admittedly controversial and questionable reputa-

tions. This presented sufficient concern to certain directors

that the topic was raised and considered at a formal Board

meeting. And it was of particular concern to CWI’s counsel,

David Bernstein. Apparently, however, the Board was satisfied

with Mr. Malnik’s denial of an association with Meyer Lansky

and was unpersuaded by the nature of the allegations. On the

basis of the information disclosed at that meeting, the Board

approved the deal after weighing the various considerations

before it.

The most pertinent piece of information, however—Mr.

Cohen’s then pending indictment with Meyer Lansky in a

casino skimming scheme—was not brought to the attention of

the outside directors by Clifford Perlman, Stuart Perlman or

Jay Leshaw. Just four months earlier, Mr. Cohen had been

indicted with Meyer Lansky and others for a crime rooted in

an alleged casino skim. Its relevance to the discussion at hand

was apparent. Had this fact been disclosed at the meeting it

might well have brought the Lansky connection into sharper

focus. The media allegations concerning Mr. Malnik and Mr.

Cohen, then thought to be baseless, might not have been so

readily dismissed. Mr. Bernstein’s unheeded admonition might

not have been so lightly regarded. Indeed, William McElnea

testified that the fact of Mr. Cohen’s indictment would have

Sla

been dispositive of the issue for him if he had known about it.

It was, according to his business ethic, a fact which should

have been fully disclosed to the Board for its consideration. It

was not; and Mr. Perlman has provided no good reason why.

As the chairman of a publicly held corporation engaged in

the heavily regulated business of casino gaming, Clifford

Perlman should have approached Sky Lake with caution and

circumspection, impelled by a sense of duty to his shareholders

and to the regulatory authorities. This sense of duty both

demanded, at the very least, full disclosure to the Board of

Directors. It should have compelled further inquiry, such as a

confrontation with Mr. Cohen himself or communication with

law enforcement or regulatory agencies. But apparently none

of this was done.

3. CRICKET CLUB

In the early summer of 1972, Clifford Perlman became

personally involved in a real estate investment with Alvin

Malnik and Samuel Cohen’s two sons, Joel and Alan Cohen.

This project involved the purchase of the partially completed

Cricket Club, a high-rise condominium complex consisting of

approximately 220 units in Miami, Florida. Calvin Kovens was

chosen to be the general contractor for the completion of the

condominium project. Mr. Kovens, along with Teamsters

Union President Jimmy Hoffa, had been convicted in 1964 for

fraud and conspiracy in using $1 million in Teamsters Pension

funds to finance a real estate venture. Although aware of this

conviction, Clifford Perlman’s only objection to using Mr.

Kovens’ construction company was based on the personal

relationship between Mr. Malnik and Mr. Kovens. When the

costs of the condominium project began to exceed the financ-

ing made available for it, Samuel Cohen lent the Cricket Club

substantial sums in excess of $6 million with which to complete

the undertaking. Close to $2 million was also borrowed from

Comal Corporation. Clifford Perlman knew that Mr. Cohen

was lending money to the Cricket Club.

Clifford Perlman’s equity interest in the Cricket Club was

$10,000. Although asserting he was to be a passive investor,

52a

and this in part due to Mr. Malnik’s reputation, all decisions

involving the business or property of the corporations formed

to undertake the condominium project required the consent of

Clifford Perlman. Moreover, the four partners in this venture

were required to indemnify each other against liabilities in

excess of the percentage interest of each in the stock of the

corporation. Clifford Perlman’s interest was one-third.

Clifford Perlman soon became the guarantor of some sub-

stantial institutional loans. As a condition to a $13 million loan

from the Carner Bank of Miami Beach to the Cricket Club,

Clifford Perlman and his partners were required to guarantee

(1) completion of the project, (2) payment of all costs thereof

and (3) repayment of the construction loan. In October 1972,

Mr. Perlman, Mr. Malnik, the Cohen sons and Mr. Kovens

executed a performance bond and a labor and material pay-

ment bond, each in the amount of $6,100,000. More guaran-

tees would follow.

Sometime i> November 1972, Philip Hannifin, then Chair-

man of the Nevada Gaming Control Board (NGCB), per-

sonally approached Clifford Perlman concerning his

involvement with Alvin Malnik in the Cricket Club. At this

meeting, Mr. Hannifin voiced his concerns over Mr. Perlman’s

association with an individual of Mr. Malnik’s reputation. As a

consequence of what Mr. Hannifin had said, Mr. Perlman

committed to extricate himself from the Cricket Club if Mr.

Malnik would not institute a libel suit against Hank Messick,

the author of Lansky.

However, Clifford Perlman remained in the Cricket Club

even after Mr. Malnik informed him that he would not file a

libel suit. Citing the fact that he was still committed as a

co-guarantor on several substantial loans to the Cricket Club,

Clifford Perlman chose to continue his ir olvement in the

project, guaranteeing new loans throughout its construction

period and lending sums of money to the corporation.

The Cricket Club project represents yet another and more

direct involvement by Clifford Perlman in the business world

of Alvin Malnik. Mr. Perlman’s partnership with Mr. Malnik

and Mr. Cohen’s sons in this venture developed into one of

53a

long duration, a fact which should have been evident from the

outset. His series of guarantees on loans to the Cricket Club

bound Mr. Perlman so firmly to the arrangement that even

when he later wanted to extricate himself, he found it impossi-

ble to do so. To this day, Mr. Perlman remains obligated on

$280,000 of these guarantees after paying $386,000 to be

relieved of guarantees of $3 million, a telling indication of his

once intricate and deep involvement in the matter.

Prior to his entry into the Cricket Club, Clifford Perlman

neither consulted with Harold Campbell, CWI’s then recently

hired Director of Corporate Security, nor inquired as to Mr.

Malnik’s background nor sought confirmation of the allega-

tions made against him. He was apparently content with Mr.

Malnik’s denials. Neither did Mr. Perlman notify the Nevada

regulatory authorities as to his contemplated venture with Mr.

Malnik.

When Mr. Hannifin first approached Mr. Perlman about this

matter in November 1972, Mr. Perlman assumed the defense of

Mr. Malnik. This was indeed a curious position given Mr.

Perlman’s earlier concern that Mr. Malnik was not licensable in

Nevada, his awareness of Mr. Mainik’s reputation and his

desire to become only a passive investor in the Cricket Club

partly due to this reputation. But not only did Mr. Perlman

defend Mr. Malnik, he proposed an alternative to outright

severance which permitted him a means to remain in the

project as Mr. Malnik expressly desired. By the time this

alternative was no longer viable, Clifford Perlman found

himself inextricably tied to the financial health of the project.

Much has been argued as to whether Mr. Perlman’s conduct

in this regard was violative of an official directive to the

contrary. The issue, however, is not so easily defined. The fact

that such a violation may not have occurred does not preclude

this Commission from viewing Mr. Perlman’s conduct nega-

tively. In November 1972, Philip Hannifin, the Chairman of

the Nevada Gaming Control Board, communicated his con-

cerns to Clifford Perlman. As a result of this meeting, Mr.

Perlman understood that he had made a commitment to Mr.

Hannifin. He subsequently, in his own words, “definitely”

S4a

breached that commitment. These circumstances cause us deep

concern about Clifford Perlman’s attitude toward the regula-

tory process.

D. COVE HAVEN

According to Mr. Perlman’s testimony, he chanced to meet

Alvin Malnik on an airplane in December 1974. Mr. Malnik

inquired whether Clifford Perlman or his company could

provide an opportunity to invest a substantial sum of money.

Clifford Perlman first suggested that Mr. Malnik pay for

improvements to the Sky Lake Country Club and accordingly

increase CWI’s rent for the country club. Mr. Perlman’s

proposal would have resulted in an increased cash drain for

CWI rather than in the cash relief his company was supposedly

then seeking. When Mr. Malnik declined that offer, Mr.

Perlman suggested a sale and leaseback of CWI’s two honey-

moon resorts located in the Poconos.

Mr. Malnik offered to purchase the properties for $15

million and to lease the properties back to CWI at an annual

rental of 13% to 15% of the purchase price. Mr. Perlman, in

turn, presented the matter to the CWI Board for resolution.

There were no negotiations over the price set by Mr. Malnik.

CWI’s Board of Directors gave conceptual approval to the

plan and, because of an apparent conflict of interest occa-

sioned by Clifford Perlman’s Cricket Club involvement, as-

signed CWI President William McElnea to conclude the

transaction. His conflict of interest, however, did not har

Clifford Perlman from ultimately voting to approve the trans-

action.

On February 20, 1975, CWI entered into a sale and lease-

back of its Cove Haven and Paradise Stream resorts with Cove

Associates, a Florida partnership comprised of Alvin Malnik

and Samuel Cohen’s sons, Joel and Alan. The assets of these

properties were sold for $15 million. Prior to the consumma-

tion of the deal, CWI learned that Cove Associates, through

Mr. Malnik, was borrowing the $15 million at 9% interest from

the Teamsters Pension Fund. As part of the arrangement, CWI

5Sa

agreed to lease back the two Pocono properties for 20 years at

an annual rent of $2,130,000 (14.25% of the purchase price).

Each of the leases gave CWI certain options to renew and to

purchase, and obligated CWI to make certain improvements.

Three related aspects of the Cove Haven sale and leaseback

transaction are worthy of particular note as they reflect on the

character of Clifford Perlman. The first aspect concerns his

willingness in late 1974 to lead his company into yet another

business entanglement with Alvin Malnik and the sons of

Samuel Cohen. The second aspect concerns his willingness to

do this despite his November 1972, meeting with Philip Hanni-

fin and his commitment to Mr. Hannifin to disassociate from

Mr. Malnik and the Cricket Club. The third aspect concerns his

failure to disclose all relevant information to the full CWI

Board during its consideration of the Cove Haven transaction.

Specifically, Clifford Perlman did not advise the full CWI

Board of his November 1972, conversation with Philip Hanni-

fin prior to the Cove Haven approval. Clifford Perlman

presumed that the independent directors knew of the Hannifin

meeting even though the Perlmans and Mr. McElnea made no

disclosure and the subject was neither raised nor considered at

the Board meeting when the Cove Haven transaction was

discussed.

Also noteworthy is the fact that CWI’s Corporate Security

Chief, Harold Campbell, was not asked to review the Cove

Haven transaction as to suitability. At that time company

policy was that all significant transactions were, in the discre-

tion of the head of the subsidiary, to be submitted for security

review.

In late 1972, Harold Campbell had been asked to investigate

Mr. Malnik’s background and had reported his results to

Clifford Perlman. While Mr. Campbell refused to express an

opinion in his testimony before us as to whether Alvin Malnik

was associated with organized crime, both Clifford Perlman

and William McElnea recalled that Mr. Campbell had pre-

viously been of the opinion that Mr. Malnik was so associated.

At about the same time as his investigation of Mr. Malnik

(late 1972), Campbell also reported to Clifford Perlman on the

56a

subject of honorary memberships at the Skylake Country

Club. In response to Mr. Perlman’s inquiry, Mr. Campbell

advised:

Many of the other Teamsters officials possessing Honor-

ary Memberships have been in frequent business and

social contact with top organized crime figures through-

out the country. Whether one agrees or not, the Central

States Pension Fund has in recent years been described in

the news media as the “bankroll of the Mafia.” Rightly or

wrongly, many Mafia figures have obtained loans from

this fund and even more importantly, many top Mafia

figures have been in a position to arrange for loans from

the fund for others, sometimes on the basis of friendship

and at other times for a substantial fee.

Interestingly enough, both the source of Mr. Malnik’s funds

for the $15 million purchase price of Cove Haven—namely the

Teamsters Pension Fund—and the 9% interest rate at which

the money was borrowed were known to CWI in advance of

the sale-leaseback agreement.

Once again, in the absence of any credible explanation

presented in this record, we are left with a serious question.

Why did Clifford Perlman, in late 1974, lead his company into

its second (and his third) business entanglement with Alvin

Malnik, especially in light of his November 1972 discussion

with the Chairman of the Nevada Gaming Control Board?

CONCLUSIONS AS TO CLIFFORD FP? 8LMAN

The facts outlined above simply do not square with the

positive testimony adduced as to the good character, honesty

and integrity of Clifford Perlman. Stated bluntly, this Commis-

sion is unable to declare that Clifford Periman may be trusted

to control a company which seeks licensure to operate a casino

in this jurisdiction. This determination flows primarily from

three considerations:

(1) the associations with Alvin I. Malnik and Samuel E.

Cohen which Clifford Perlman led CWI to engage in or which

he engaged in personally;

57a

(2) the attitude of Clifford Perlman with regard to the

regulatory process; and

(3) the candor with which Clifford Perlman dealt with his

fellow Directors on the CWI Board.

Based on the substantial credible evidence in the record as a

whole, this Commission finds Samuel E. Cohen to be a person

of unsuitable character and unsuitable reputation. Following

indictment by the federal authorities together with Meyer

Lansky and others, he was convicted and incarcerated for

filing a false income tax return on facts relating to the skim-

ming of proceeds from the Flamingo casino in Las Vegas,

Nevada. Previously he had been fined for violating the Com-

modity Exchange Act. Mr. Cohen’s alleged involvement with

Meyer Lansky and others in the Flamingo skimming indict-

ment received widespread publicity in the Miami area in 1971.

Based on the substantial credible evidence in the record as a

whole, this Commission finds Alvin I. Malnik to be a person

of unsuitable character and unsuitable reputation. As to his

character, the evidence establishes that Mr. Malnik associated

with persons engaged in organized criminal activities, and that

he himself participated in transactions that were clearly illegiti-

mate and illegal. As to his reputation, he has been identified

repeatedly in the news media as a close business associate of

Meyer Lansky and other reputed organized crime figures.

Moreover, federal law enforcement authorities have long be-

lieved Mr. Malnik to be involved in organized crime.

Prior to the 1971 Sky Lake transaction, Clifford Perlman

knew of Mr. Malnik’s unsavory reputation and Mr. Cohen’s

pending indictment for casino skimming. Yet Mr. Perlman led

his company into a direct, intense, long-lasting association

with these men. He himself became personally involved in the

1972 Cricket Club transaction directly and intimately with Mr.

Mainik and Mr. Cohen’s two sons in a second ongoing associa-

tion. And, in the late 1974 Cove Haven transaction he led his

company into a direct, intensive, continuing association with

Mr. Malnik and Mr. Cohen’s sons.

Although Samuel Cohen was not a direct participant in

either the Cricket Club project or the Cove Haven agreement,

58a .

the evidence plainly indicates that he was indirectly interested

in both. Mr. Cohen lent large sums of money to the Cricket

Club and Mr. Perlman knew of those loans. Moreover, as part

of the Cove Haven transaction, CWI requested and received a

deferral of the payments due on the Sky Lake obligations.

Since Mr. Malnik and Samuel Cohen were the principals in the

Sky Lake deal, it is possible that some of the Cove Haven

proceeds were being channelled to Mr. Cohen. Thus, Mr.

Perlman exhibited no great reluctance to continuing involve-

ment, direct or indirect, with the indicted and later convicted

Mr. Cohen as well as the suspect Mr. Malnik.

Beyond Mr. Perlman’s willingness to engage in repeated and

enduring relationships with Messrs. Malnik and Cohen, no

reasonable explanation has been provided for the failure of Mr.

Perlman to provide the CWI directors with material informa-

tion regarding those relationships. Specifically, Mr. Perlman

chose not to disclose the fact of Mr. Cohen’s pending indict-

ment when the board voted on the Sky Lake proposal. Second,

Mr. Perlman made no mention of Mr. Hannifin’s disapproval

of Mr. Malnik before the board was presented with the Cove

Haven offer. These omissions contradict the characterization

of Mr. Perlman as a man of candor and forthrightness.

Further, they raise disturbing questions as to whether Mr.

Perlman was so anxious to consummate the transactions that

he refused to jeopardize board approval by full disclosure.

These questions have simply not been answered.

BRC contends that these transactions may have been public

relations mistakes but that they did not actually jeopardize the

integrity of gaming operations. While it may be true that Mr.

Malnik and Mr. Cohen were not literally in control of the

casino, their financial arrangements provided them with an

obvious opportunity to exercise economic leverage against

CWI. In point of fact, CWI experienced cash shortages which

prompted it to obtain relaxation of its Sky Lake obligation

from Mr. Malnik and Mr. Cohen. At the same time, CWI was

increasing its indebtedness to Mr. Malnik and the sons of

Samuel Cohen. Thus, Mr. Perlman in a very real sense de-

livered his company into the hands of Mr. Malnik, Samuel

Cohen and Mr. Cohen’s sons.

59a

From the foregoing and from the entire record, this Com-

mission is not able to find by clear and convincing evidence

that Clifford Perlman possesses the good character, honesty

and integrity demanded by the Casino Control Act. Accord-

ingly, Clifford Perlman is not qualified.‘

B. STUART Z. PERLMAN

Stuart Z. Perlman, who presently resides in Miami Beach,

Florida and maintains a residence in Longport, New Jersey,

was born on September 20, 1927, in Philadelphia, Pennsylva-

nia. He was educated in the Philadelphia public schools and

attended LaSalle College for one year. In 1956, along with his

older brother, Clifford, he purchased the first Lum’s restau-

rant.

Today, Stuart Perlman is Vice Chairman of the Board of

Directors of both CWI and CNJ. He is also the second largest

stockholder of CWI, owning approximately 1.7 million shares,

or about 8% of the outstanding stock. In addition, he owns

approximately 153,000 shares of CNJ, or about 1% of the

outstanding stock of that company. By virtue of his positions

as an officer, director, major stockholder and principal em-

ployee of CWI and CNJ, Stuart Perlman is a person who must

individually be qualified for approval. The applicant, BRC,

and Stuart Perlman have produced evidence in support of the

qualification of Stuart Perlman all of which has been carefully

examined, considered and weighed. The Division has recom-

mended that this Commission find Stuart Perlman unsuitable

for qualification.

Most of the evidence relevant to the suitability of Stuart

Perlman has already been stated with regard to Clifford

4 The Division also asserted that Mr. Perlman had supplied false or

misleading information as to when he first learned of Mr. Cohen’s indict-

ment. In his testimony, Mr. Perlman admitted that he acquired such knowl-

edge before the Sky Lake transaction. It seems that Mr. Perlman’s

recollection was not as clear in an interview which he gave to the Division in

April 1979. In any event, the Commission does not find Mr. Perlman to be

disqualified on this basis. See N.J.S.A. 5:12-86(b).

60a

Perlman and is incorporated here by reference. In July 1971,

with full knowledge of the pending indictment against Samuel

Cohen, Meyer Lansky and others, with full knowledge of the

questionable reputations of Samuel Cohen and Alvin Malnik,

without discussing the Cohen indictment with CWI’s outside

directors, and against the advice of CWI’s outside counsel,

Stuart Perlman voted in favor of entering the Sky Lake

transaction. Moreover, during the period between December,

1974, and February 20, 1975, CWI was considering the Cove

Haven sale and leaseback transaction. At that time, Stuart

Perlman, who was aware of the substance of the November

1972 conversation between Philip Hannifin and Clifford

Perlman, voted to enter into the Cove Haven transaction.

Additionally, Stuart Perlman did not discuss or bring to the

attention of CWI’s outside directors the Hannifin conversa-

tion.

By virtue of his own involvement in these events, Stuart

Perlman was obliged to answer serious questions about his

character, honesty and integrity. More particularly, these ques-

tions flow from his associations with Alvin Malnik and Samuel

Cohen, his attitude toward the regulatory process, and his

apparent lack of candor in dealing with the other CWI direc-

tors.

Furthermore, it is clear from the record that Stuart and

Clifford Perlman are more than just brothers. Since 1956,

when they jointly purchased the first Lum’s restaurant, they

have been close business associates. They own, respectively,

8% and 10% of the outstanding stock of publicly traded CWI.

They participate jointiy in several other business ventures.

Indeed, the testimony indicates that for the past several years

Stuart Perlman has handled all of Clifford’s personal finances,

even to the point of signing Clifford’s checks and making

investments for him. Thus, there is a substantial commonality

of economic interests as well as a close blood relationship

between the two men.

In light of all of the above considerations, and after care-

fully weighing these matters and viewing them in the context of

the entire record, the Commission finds that BRC has failed to

6la

meet the affirmative responsibility of establishing the good

character, honesty and integrity of Stuart Perlman. Accord-

ingly, Stuart Perlman is not qualified.

C. JAY E. LESHAW

Jay Leshaw is clearly a qualifier as to the casino license

applicant. He is now a senior vice president and a director of

Caesars World, Inc., and president and a director of three of

its subsidiaries: Sky Lake Development, Inc.; California Club,

Inc.; and Corporate Real Estate Equities, Inc. He is also a

shareholder in Caesars World, Inc. (owning 30,000 of its

approximately 26.3 million shares or 0.001%).

The Division’s objection to Mr. Leshaw’s qualifications is

based primarily upon his role, while a Caesars World, Inc.

inside director and vice president, in the 1971 approval of the

Sky Lake transaction. At the time of the transaction, Mr.

Leshaw knew of Mr. Malnik’s reputation and of Mr. Cohen’s

indictment with Meyer Lansky in Florida less than four

months earlier in the Flamingo “skim” prosecution. No open

discussion with the outside directors of these facts had oc-

curred at that board meeting. However, when thirty-one

months later Caesars World, Inc. voted to restructure the Sky

Lake lease, Mr. Leshaw appears to have been unaware of the

November 1972 discussions between Philip Hannifin and Clif-

ford Perlman concerning Mr. Hannifin’s reservations as to the

propriety of Mr. Perlman’s personal business dealings with Mr.

Malnik in the Cricket Club.

Jay Leshaw was born in 1927, educated at the University of

Miami and presently resides in Coral Gables, Florida. About

1963, while in the construction business, he met Clifford

Perlman 2nd began doing work for Lum’s, inc. which was

designing, locating, financing, constructing and eventually

franchising its fast food restaurants. In 1967 he joined Lum’s,

Inc. as an executive vice president and became one of its

directors. By that date he had assumed a primary responsibility

for the company’s restaurant business and thereafter main-

tained it until July 1971 when its restaurant operations were

62a

sold. In later 1968, Melvin Chasen joined the company as an

executive vice president and, in mid-1970, became its president.

Less than three months after divesting itself of the restaurant

operations, Lum’s, Inc. closed on its long-term lease of the Sky

Lake development property. Mr. Leshaw then became, and has

to the present remained as, president of the Caesars World,

Inc., subsidiary responsible for this asset. Since then, Mr.

Leshaw has maintained his offices at the property. Initially,

before the south Florida condominium economy slowed, he

actively refined the development program as to the property. In

1977, however, CWI retained California land developer Jerry

Snyder to design a more effective sales program for the

project. Currently, more than 95% of the units have been sold.

It was in 1978 that the name of the country club there was

changed to the California Club.

On balance, Mr. Leshaw’s activities are not such as to

prevent his qualification. His role in Caesars World, Inc., has

never been one of setting policy or deciding as to acquisitions.

It rather has been confined to the design and development of

South Florida real estate operations, at first the restaurant

business and more recently the condominium property. He has

always been located in South Florida. Although that locale is

admittedly the base for Messrs. Lansky, Malnik and Cohen,

Mr. Leshaw’s responsibilities to CWI are quite remote from the

concerns and sensitivities of Nevada and its casino gaming

industry. Mr. Leshaw was not the source of the Malnik or

Cohen associations nor were the associations ever personal to

him. Plainly, as an employee of Caesars World, Inc., he was

subject to the policies set by the Perlmans. It is true that ip

1971, he did not discuss with CWI’s outside directors the fact

of the Samuel Cohen “skim” indictment. Although this failure

is hardly praiseworthy, it is understandable in light of the

relative positions of the Perlmans and Mr. Leshaw. Were such

an omission to occur today under the New Jersey regulatory

system, a different result might follow. On this record, though,

the Commission is satisfied that Mr. Leshaw has established his

“good character, honesty and integrity” by clear and convinc-

ing evidence. Accordingly, Jay E. Leshaw is found to qualify

63a

as a director, officer and shareholder as to this applicant for a

New Jersey casino license.

D. WILLIAM H. McELNEA, JR.*

1. INVESTMENT BANKER AND OUTSIDE DIRECTOR

William H. McElnea, Jr., is the president and chief operat-

ing officer of the holding company, Caesars World, Inc., and

the intermediary company, Caesars New Jersey. He is sepa-

rately a member of each of the eight-member boards of

directors of Caesars World, Inc., Caesars New Jersey, and the

Boardwalk Regency Corporation. He is a shareholder of

Caesars World, Inc. in which he holds 420,000 shares, or 1.6%

of the stock, and a shareholder of Caesars New Jersey, in

which he has 58,970 shares, or 0.4% of the 15.98 million

outstanding shares. He has been associated with CWi and its

predecessor, Lum’s, Inc., since 1966, first as a financial advi-

sor, later as an outside director, and since late 1972 as the

president of CWI, a position that has produced his current,

thorough involvement in the corporation and its subsidiaries.

Undoubtedly, Mr. McElnea is a person required to meet the

standards, except residency, for a casino key employee license.

See N.J.S.A. 5:12-85(c) and (d).

Significant points about Mr. McElnea reside in the evidence

concerning two of CWI’s associations. The first is with the

Central States Southeast and Southwest Teamsters Pension

Fund of Chicago, Illinois, a relationship that began in 1969

with the acquisition of Caesars Palace Hotel and Casino. The

second is the association between CWI and Alvin Malnik and

Samuel Cohen, who are reputed associates of Meyer Lansky,

of Miami, Florida, the same city where Mr. Malnik and Mr.

5 Only Commissioners Thomas, Zeitz and McWhinney join in this

opinion regarding Mr. McEinea. Chairman Lordi separately concurs in the

determination to find Mr. McElnea qualified. Vice-Chairman Danziger

dissents from this determination.

64a

Cohen reside and do business. This association remained in

place unt’! recent days through the corporation’s involvement

in the Sky Lake development, and with Cove Associates in the

Pocono Mountain properties, and began at least as early as

June 1971.°

The associations with the Teamsters Pension Fund, and with

Malnik and Cohen were active and growing until December 10,

1975. The first, with the Pension Fund, deepened because of

the second, that is the association with Mr. Malnik and Mr.

Cohen, but particularly with Mr. Malnik. The Nevada Gaming

Commission and the Nevada Gaming Control Board made

their joint position on the Malnik association clear to Caesars

World, Inc. on December 10, 1975, and again on April 13,

1976, when the corporation was ordered not to associate with

persons of unsavory or notorious reputations.

From that point, the expansion of the two associations

halted and a corporate effort was begun to sever them. Only a

beginning has been made until now, but it is doubtful that

beginning could or would have been initiated without the

effort of Mr. McElnea. The qualification of Mr. McElnea

depends upon his role in these CWI associations, which the

Attorney General, through the Division of Gaming Enforce-

ment, finds is such as to prevent his qualification.

The evidence does not raise questions as to the reputation of

Mr. McElnea. It does put before the Commission matters

concerning Mr. McElnea’s treatment of the associations with

Mr. Malnik and Mr. Cohen, and the Pension Fund. Of course,

it is the applicant who has the burden to establish by clear and

convincing evidence the traits of good character, honesty and

integrity. The evidence must enable the Commission to believe

that the requisite character, honesty and integrity have been

demonstrated.

6 At the conclusion of the hearing, BRC presented a plan to create and

fund two trusts which would pay when due the continuing obligations of

CWI as to the Cove Haven transaction and the Sky Lake acquisition. This

plan was accepted by the Commission as adequately insulating the companies

from Mr. Mainik and Mr. Cohen.

65a

William H. McElnea, Jr., was born in New Jersey in 1922,

reared in Connecticut, and educated at Dartmouth College

from which he received his bachelor’s and masters degrees. In

1955 after having worked for seven years in Wall Street banks,

he joined the small New York investment banking firm of Van

Alstyne, Noel and Co., where he specialized in corporate

financing.

In 1966, shortly after he met Clifford Perlman, Mr. McElInea

and the Van Alstyne firm accepted the Florida-based Lum’s,

Inc., as a client. When, in 1967, Lum’s became a publicly

traded company, Mr. McElnea was made an outside director.

He remained as a partner in Van Alstyne, Noel and Co. His

status as an outside director and investment banker continued

for six years. Effective August 31, 1972, Melvin Chasen re-

signed as president of Caesars World, Inc. Two months later,

on November 1, 1972, William McElnea succeeded Mr. Chasen

as president of the corporation. Mr. McElnea continued as a

director, and relocated to the corporation’s headquarters in

Los Angeles. He is and since that day has been the chief

operating officer of CWI.

In 1966 when Mr. McElnea began his association with Lum’s

as its investment banker, it was a growing fast food restaurant

and franchising firm, based in South Florida. In 1967 through

the offices and talents of Mr. McEInea the company undertook

and completed its first major financing. This public offering

may seem a pittance today when measured against the magni-

tude of CWI’s current financings, but in 1967 it represented a

milestone in its corporate development. At the time, Stuart

Perlman was president of the corporation and his brother,

Clifford Perlman, was its principal executive officer. They had

then owned the company for ten years.

In early 1969 Clifford Perlman began discussions which led

to the September 30, 1969, acquisition by Lum’s of the then

three-year-old, 680-room Caesars Palace Hotel and Casino in

Las Vegas, Nevada. As part of the transaction, Lum’s assumed

an $18.1! million mortgage obligation to the Teamsters Pension

Fund.

66a

In December, 1969, Lum’s acquired the Pennsylvania honey-

moon resort called Cove Haven, and fourteen months later

acquired the nearby honeymoon resort called Paradise Stream.

In July, 1971, Lum’s divested itself of the restaurant and

franchising operations, and by then had also divested itself of

the Dirr’s Meat Processing and Distribution Company, and the

chain of Eagle Army-Navy retail outlet stores. In June, 1971,

discussions between Mr. Malnik and Lum’s President Melvin

Chasen led to negotiations in July 1971, which resulted on

October 14, 1971 in Lum’s closing with the Comal Corpora-

tion on the 623-acre condominium development property in

North Miami, Florida, known as Sky Lake North. Comal

Corporation, which had acquired the property 10 months

earlier, was owned equally by Mr. Malnik and Mr. Cohen. The

property was then subject to a $10 million Teamsters Pension

Fund loan. On December 16, 1971, Lum’s Inc. changed its

named to Caesars World, Inc.

Mr. McElnea was not the caus. ‘ the association of CWI

with the Teamsters Pension Fund, a relationship which orig-

inated in the 1969 acquisition of Caesars Palace, described on

the record as being initiated by Clifford Perlman. Nor did Mr.

McElnea bring the corporation into contact with Mr. Malnik

and Mr. Cohen, a development attributed to Melvin Chasen

and Clifford Perlman in the 1971 acquisition of Sky Lake. As

its investment banker, Mr. McElnea was the servant of the

policy and business decisions made by his client, and by its

chief executive, Clifford Perlman. Becoming an outside direc-

tor required Mr. McElnea to take positions and record his

votes on matters of corporate policy formulated by the com-

pany’s executives, most notably the Perlmans.

In the corporate world in the period of 1969 to 1971 the role

and obligation of outside directors of publicly traded corpora-

tions were not perceived as strictly or as solemnly as in 1980.

More deference was given at that time to policy determinations

made by corporate executives, such as Clifford and Stuart

Perlman.

CWI’s associations with Mr. Malnik, Mr. Cohen and the

Pension Fund before late 1972 do not reflect on William

67a

McElnea’s “good character, honesty and integrity,” or his

fitness to participate now in the New Jersey gaming industry.

The associations were not personal as to McElnea. They were

busj..ess relationships arranged by the corporate lenders who

were members of the Miami community. During this time,

McElnea worked and resided in New York and Connecticut.

2. PRESIDENT OF CAESARS WORLD, INC.

The role of William McElnea changed on November 1, 1972,

when he became president of CWI. As president he became,

after Clifford Perlman, the corporation’s leading executive,

but guided heavily by the policies developed by Clifford

Perlman, and transmitted by the corporation chairman to the

board of directors.

In his first three years as president, Mr. McElnea led CWI in

restructuring the Sky Lake financial arrangement with Comal

Corporation from a lease into a purchase. This finally made it

possible for CWI to begin undertaking development of the

property, which had been delayed three years by the trans-

action over which Mr. Perlman and Mr. Chasen had presided

in 1971. In February, 1975, through a sale and leaseback of the

Cove Haven and Paradise Stream resorts with Cove Associ-

ates, CWI fell headlong into a new association with Mr.

Malnik and the Teamsters Pension Fund. This time, Mr.

Cohen’s two sons, rather than Mr. Cohen himself, were part of

the deal. Again the transaction was brought to CWI by

Clifford Perlman. There is also some evidence that CWI

considered, at about the time it made the sale and leaseback, a

refinancing 0i its overall corporate debt.

Following the transaction with Cove Associates, the Securi-

ties and Exchange Commission ordered a private investigation

of CWI’s corporate dealings with Mr. Malnik. The SEC ex-

amined both the Sky Lake and Cove Associates transactions,

and also Clifford Perlman’s private dealings with Mr. Malnik

in the Cricket Club venture. On November 10, 1975, the Los

Angeles Timies published a front page story under the headline,

“Caesars Palace Firm Under Investigation.” As noted, the

Nevada gaming authorities followed swiftiy on December 10,

68a

1975, and April 13, 1976, first with an admonition and subse-

quently with an order directing CWI not to expand its associa-

tions with Mr. Malnik, and to refrain from associating again

with persons of unsavory or notorious reputation.

It appears from the record that such compliance efforts as

CWI began to make then and has made until now flow from

William McElnea. After a prolonged—and the Division claims

too long—time the corporation was able to sever its insurance

ties with the notorious Allen Dorfman, and through him, with

United Founders Insurance Corporation. These ties were

forged not by Mr. McElnea but by his predecessor as CWI

president, Melvin Chasen. Mr. McElnea, clearly, was the driv-

ing force in the severance. If he tempered his drive because of

considerations stemming from the ongoing relationships with

the Pension Fund, this tempering must be seen against the

backdrop of his concerted effort to arrange new, conventional,

sound, institutional financing for the corporation. He has

succeeded. Where the Perlmans brought Mr. Malnik and the

Teamsters Pension Fund to Caesars World, Mr. McElnea has

brought the Chemical Bank, the services of E.F. Hutton, and

now the Aetna Insurance Company, among others. No evi-

dence suggests new or expanded associations with Mr.Malnik,

Mr. Cohen or the Teamsters Pension Fund since 1975 by CWI,

a bright comparison to the dalliance of Clifford Perlman in his

effort to sever himself from the Cricket Club and in his

flirtation with that investment even after Nevada had made its

message eminently clear.

The sources of the $138 million committed to date by CWI

to the Boardwalk Regency project in Atlantic City demonstrate

amply the new kind of financing that Mr. McElnea has sought

and found. Those sources include $47 million from major

financial institutions, $28 million from obligations undertaken

to former owners of realty, and $63 million from such internal

financial wellsprings as bank lines, public offerings, and

operating revenues.

The November 1975 Los Angeles Times news story alerted

two members of CWI’s Board of Directors to Mr. Malnik’s

reputation, and to the fact that Philip Hannifin of the Nevada

69a

Gaming Control Board had talked to Clifford Perlman in

November 1972 and left him with an understanding that Mr.

Perlman was to end his Cricket Club involvement.

It is undisputed that Mr. McElnea knew about Mr. Malnik

by the end of 1974 and the beginning of 1975, when the Cove

Associates deal was presented and consummated. He also

knew by then the substance of the Hannifin-Perlman discus-

sion. He did not share his knowledge with the two uninformed

directors, Manuel Yellen and John Polite. That he should have,

he knows now, and this Commission knows. But seen against

the background of Clifford Perlman’s disproportionate in-

fluence in the corporation, and the division of labor and

interest between Mr. Perlman, the man who decided what

would happen, and Mr. McElnea, the man Perlman charged

with making it happen, it is clear that Mr. McElnea could

rightfully infer that such disclosure was always Mr. Perlman’s

responsibility.

There is no doubt that sometime in 1975, after the Cove

Associates deal, but before the November 10 Los Angeles

Times story, both Mr. Perlman and Mr. McElnea discussed

with Mr. Malnik a sale and leaseback of Caesars Palace Hotel.

The weight of the record is clear and convincing that when

Alvin Malnik had deals to propose to Caesars World, Inc., he

went to Clifford Perlman. Whatever the extent of those discus-

sions with Mr. Malnik, and in the testimony there was only

one, Mr. Perlman would have been the source.

Caesars World, Inc. in this hearing has brought before this

Commission a group of young, abie, honest management

professionals, and new outside directors of measurable busi-

ness experience and probity, who have been attracted to the

company under the presidency of Mr. McElnea, and who serve

on his management team. Their presence is further testimony

to his business ability. It also underscores the increasing tenac-

ity of his commitment to put not only time but distance

between his corporation and the questionable beginnings of

Nevada gaming.

70a

3. FINDING AS TO WILLIAM H. MCELNBA, JR.

In judging the good character, honesty and integrity of

William McElnea, as in making such judgment upon any

applicant, the Commission must examine the whole man, and

the entire circumstances in which he performed. As in all areas

of human endeavor, there is in the regulatory process never a

situation absent some scintilla, some particle of doubt. But on

the basis of the whole record, on his accomplishments at

Caesars World, the performance of the corporation in New

Jersey under his leadership since May 30, 1979, and the

sureness of his understanding of the regulatory process for five

years, the Commission can and does find clearly and convinc-

ingly that Mr. McElnea is a man of good character, honesty,

and integrity and one suitable to hold a license, and to conduct

gaming affairs in the State of New Jersey. He is thus found to

qualify as an officer, director, and shareholder as to this casino

applicant.

The finding that Mr. McElnea is qualified and suitable for

licensure puts a heavy responsibility upon him. Placed in the

perspective of the Commission’s other findings as to the

unsuitability of the chairman and vice chairman, the leadership

of Caesars World, Inc., right now, and as a practical matter,

appears to fall squarely upon Mr. McElnea. It will be for him

to decipher the meaning of that leadership, and to demonstrate

it. In making this decision as to Mr. McElnea the Commission

reposes a trust in him. It is fully mindful of the circumstances

and expects he will be too.

E. OTHER PERSONS REQUIRED TO QUALIFY

In accordance with Sections 85(c) and 85(d) of the Act

(N.J.S.A. 5:12-85(c) and (d)), the Commission and the Divi-

sion agreed that there were 30 persons required to qualify as

part of the BRC application. The 26 individuals who were not

the subject of a Division challenge and about whom no

grounds for rejection appear are the following:

Tila

1. HOWARD B. BACHARACH, a resident of Ventnor, New

Jersey is 39 years of age and employed by BRC as Vice-Presi-

dent of Administ: ation.

2. HAROLD B. BERKOWITZ, a resident of Los Angeles,

California, 61 years of age, is an outside director of both

Caesars World, Inc. and Caesars New Jersey, Inc.

3. LARRY L. BERTSCH, a resident of Somers Point, New

Jersey, is 41 years of age and employed by BRC as Treasurer

and Vice President of Finance.

4. PETER G. BOYNTON, a resident of Linwood, New Jersey,

is 36 years of age, a Director of BRC and, a Senior Vice

President of BRC.

5. ALFRED J. CADE, a resident of Linwood, New Jersey, is

49 years of age, a Director of BRC and a Senior Vice President

of BRC.

6. HOWARD E. CAMPBELL, JR., a resident of Las Vegas,

Nevada, is 59 years of age and employed by Caesars World,

Inc., as Vice President of Security.

7. JOHN H. CONNORS, a resident of Glen Ridge, New

Jersey, is 56 years of age and employed by Caesars World, Inc.,

as Assistant Vice-President of Security.

8. DUANE M. EBERLEIN, a resident of Tarzana, California,

is 40 years of age and is employed by Caesars World, Inc., as

Controller and Chief Accounting Officer and by Caesars New

Jersey, Inc., as Controller and Vice President.

9. MAXWELL J. GOLDBERG, a resident of Margate, New

Jersey, is 55 years of age, an employee of BRC in the Office of

the President and a Director of BRC.

10. WILLIAM E. HAINES, a California resident, is 58 years

of age and is employed by both Caesars World, Inc., and

Caesars New Jersey, Inc., as Vice President of Finance.

11. DAVID P. HANLON, a resident of San Juan Capistrano,

California, is 34 years of age and is employed by Caesars

72a

World, Inc., and by Caesars New Jersey, Inc., as Vice Presi-

dent of Operations.

12. STEPHEN F. HYDE, a resident of Linwood, New Jersey,

is 34 years of age, is an Executive Vice President and Chief

Operating Officer of BRC and a Director of BRC.

13. J. TERRANCE LANNI, a resident of Margate, New Jersey

and California, is 37 years of age. Although he recently

resigned as Director and Chief Executive Officer of BRC, Mr.

Lanni still is employed as Executive Vice President of both

Caesars World, Inc. and Caesars New Jersey, Inc.

14. JAMES A. LENZ, a resident of Longport, New Jersey, is

45 years of age and is employed by BRC as the Casino

Manager.

15. CYRIL PATRICK MCCoy, a resident of Parsippany and

Absecon Highlands, New Jersey, is employed by BRC as

Corporate Controller.

16. JAMES J. NEEDHAM, a resident of Bronxville, New

York, serves as an outside director of both Caesars Worid, Inc.

and Caesars New Jersey, Inc.

17. MILTON NEUSTADTER, a resident of Margate, New Jer-

sey, 55 years of age, is an employee of BRC in the Office of the

President and is a Director of BRC.

18. BERTIN J. PEREZ, a resident of Encino, California,

although recently resigned as Group Vice President of Caesars

World, Inc., continues to serve as a consultant to Caesars

World, Inc.

19. CARL A. PROPES, a resident of Beverly Hills, Califor-

nia, is 52 years of age and is employed as Vice President of

Administration by both Caesars World, Inc., and Caesars New

Jersey, Inc.

20. BERNARD 'W. RESNICK, a resident of New Jersey, is 55

years of age and is employed by BRC as the Assistant Casino

Manager. It should be noted that the Commission previously

licensed Mr. Resnick as a casino key employee.

73a

21. DONALD D. ROBERTSON, a resident of Burbank, Cali-

fornia, is 43 years of age and is employed as Treasurer of both

Caesars World, Inc. and Caesars New Jersey, Inc., in addition

to being employed as Assistant Treasurer of BRC.

22. MEYER P. SCHWEITZER, a resident of New York, New

York, is 69 years of age and serves as an outside director of

both Caesars World, Inc., and Caesars New Jersey, Inc.

23. RICHARD H. SHEEHAN, JR., a resident of Encino,

California, is 35 years of age and is employed by both Caesars

World, Inc. and Caesars New Jersey, Inc., as Secretary and

Vice President of Law, in addition to being employed by BRC

as Corporate Secretary.

24. WILLIAM P. WEIDNER, a resident of Atlantic City, New

Jersey, is 35 years of age and is employed by BRC as Vice

President of Marketing.

25. LARRY J. WOOLF, a resident of Brigantine, New Jersey,

is 35 years of age and is employed by BRC as Assistant Vice

President of Casino Operations. It should be noted that the

Commission previously licensed Mr. Woolf as a casino key

employee.

26. MANUEL YELLEN, a resident of Pacific Palisades, Cali-

fornia, serves as an outside director of both Caesars World,

Inc., and Caesars New Jersey, Inc., in addition to being

employed as a consultant to Caesars World, Inc.

In addition to considering the qualifiers for the Boardwalk

Regency Corporation application for a casino license, the

Commission has also considered tie qualifiers for the Jemm

Company based upon its application for a casino license to be

the owner and lessor of the casino hotel facility. See N.J.S.A.

5:12-82(b). The Jemm Company is a New Jersey general

partnership consisting of five partners all of whom are the legal

owners of a partnership interest and thereby required to be

considered as qualifiers pursuant to N.J.S.A. 5:12-85(e). Addi-

tionally, three of the five partners hold their respective partner-

ship interest in trust for their wives. Accordingly, the wives of

74a

these three partners hold a beneficial interest in the Jemm

Company and thereby are also required to be considered as

qualifiers pursuant to N.J.S.A. 5:12-85(e).

It should be noted that the Division did not interpose an

objection to the suitability of any of the eight qualifiers of the

Jemm Company. Those eight qualifiers are the following:

1. ALBERT A. TOLL, a resident of Pennsylvania and

Florida, holds as trustee for his wife, Sylvia S. Toll, a 29.16%

partnership interest in the Jemm Company.

2. SYLVIA S. TOLL, the wife of Albert A. Toll, is the

beneficiary of the 29.16% partnership interest indicated imme-

diately above.

3. JOSEPH TOLL, a resident of Margate, New Jersey, holds,

as trustee for his wife, Evelyn Toll, an 18.75% partnership

interest in the Jemm Company.

4. EVELYN TOLL, the wife of Joseph Toll, is the beneficiary

of the 18.75% partnership interest indicated immediately

above.

5. EDWARD BERON, a resident of Margate, New Jersey,

holds, as trustee for his wife, Edna Beron, an 18.75% partner-

ship interest in the Jemm Company.

6. EDNA BERON, the wife of Edward Beron, is the benefi-

ciary of the 18.75% partnership interest indicated immediately

above.

7. MILTON NEUSTATDER, a resident of Margate, New Jersey,

holds a 16.67% partnership interest in the Jemm Company. As

previously indicated, Mr. Neustatder is also a qualifier of

Boardwalk Regency Corporation in that he is employed by that

applicant in the Office of the President in addition to serving

as a director of that corporation.

8. MAXWELL GOLDBERG, a resident of Margate, New Jer-

sey, holds a 16.67% partnership interest in the Jemm Com-

pany. As previously indicated, Mr. Goldberg is also a qualifier

of Boardwalk Regency Corporation in that he is empleyed by

75a

that applicant in the Office of the President in addition to

serving as a director of that corporation.

Having considered all of the information supplied by each of

the qualifiers and by the Division of Gaming Enforcement, the

Commission is satisfied that each of the named individuals

meets the statutory standards required of a person who must

qualify as part of a casino license application.

FINDINGS AS TO COMPLIANCE WITH OTHER

LICENSING REQUIREMENTS

In addition to those areas discussed above, the Commission

was required to make other findings in order to issue a casino

license, even though these areas were not the subject of a

dispute between the parties. The Commission accordingly

made the following findings with reference to these remaining

areas:

1. That the applicants have established to the satisfaction of

the Commission that the facility and its location are suitable

and that neither the Atlantic City ,atron market nor the

overall environment nor its economic, social, demographic,

competitive or natural resource conditions will be adversely

affected by the facility, as required by N.J.S.A. 5:12-84(e);

provided, however, that the conditions attached to the tem-

porary casino permit relating to the facilities (nos. 2 through

13) remain in effect until further order of the Commission.

2. That Boardwalk Regency Corporation and the Jemm

Company together own in fee all the land on which the

approved hotel is situated; that the Jemm Company as

landlord leases the entire approved hotel facility and land

thereunder directly to Boardwalk Regency Corporation as

tenant; that both Boardwalk Regency Corporation and the

Jemm Company are eligible and required to hold separate

casino licenses in accordance with N.J.S.A. 5:12-82(a), (b)

and (c).

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3. That the lease agreement entered into by Boardwalk

Regency Corporation and the Jemm Company is in writing

and has been filed with the Commission; that the term thereof

exceeds 30 years; that it concerns the entire approved hotel

building and the land thereunder; that it contains a fixed-sum

buy-out provision conferring upon Boardwalk Regency Corpo-

ration as lessee the right to acquire the entire interest of the

lessor in the event said lessor is found to be unsuitable; that it

contains a provision for the payment to the Jemm Company of

a percentage of casino revenues; and that said lease is approved

as conforming to the requirements of N.J/.S.A, 5:12-82(c)(5)

and (6).

4, That Boardwalk Regency Corporation and the Jemm

Company shall be jointly and severally liable for all acts,

omissions or violations of the Casino Control Act by either

Boardwalk Regency Corporation or the Jemm Company as

required by N.J/.S.A, 5:12-82(c)(9).

5. That the approved hotel contains a total of 130,714

square feet of qualifying public space including 77,781 square

feet of dining, entertainment and sports space and 27,052

square feet of kitchen support facilities and thereby exceeds the

minimum qualified public space requirements set forth in

N.J.S.A. 5:12-83.

6. That the approved hotel contains 503 qualifying sleeping

units of an average size of 400 square feet and thereby exceeds

the minimum qualifying sleeping units requirements set forth

in N.J.S.A, 5:12-27 and 83a).

7, That the approved hotel contains a single casino room of

48,630 square feet which conforms to the limitation set forth in

N.J.8.A, $:12-6 and 83(d).

8. That Boardwalk Regency Corporation has agreed to

afford an equal employment opportunity to all prospective

employees in accordance with an affirmative acuion program

approved by the Commission and consonant with the provi-

sions of the “Law Against Discrimination” as required by

N.J.8.A, 5:12-134(b); it is to be noted, however, that the

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applicant did not in a timely and diligent fashion insure that its

construction contractors would offer equal employment op-

portunity to all persons employed in the construction of the

Boardwalk Regency Hotel and Casino.

9. That the applicants, except as otherwise previously found

herein with regard to Stuart Perlman and Clifford Perlman,

have established by clear and convincing evidence the integrity

and reputation of, as well as the adequacy of, all financial

sources which bear any relation to the casino proposal, as

required by N.J.S.A. 5:12-84(b).

10. That both applicants have established by clear and

convincing evidence their financial stability, integrity and re-

sponsibili

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